Warner Music Group continues to sing a sad tune when it comes to its financial performance. It reported today that it had a net loss of $103M in the quarter that ended in September, 124% bigger than its loss in the same period last year, on revenues of $707M, down 6%. The financial report is mostly for bondholders; Russian-born billionaire Len Blavatnik’s Access Industries bought the company in July for $3.3B. Still, it’s a dreary filing for the company, whose roster of hitmakers includes Bruno Mars, Cee Lo Green, Red Hot Chili Peppers, and Jill Scott. Warner says that its recorded music revenues fell 8% to $571M. Although sales from digital distribution were up 6% to $194M, that was “more than offset by contracting demand” for CDs. Meanwhile, revenues at the music publishing operation fell 1% to $141M. Warner says that the quarter’s disappointing results were due to “a light release schedule”; weak sales in the U.S., Japan, and most of Europe; and rising interest payments on the debt Access took on to buy the music company. READ MORE »
Apple made a major improvement to its digital music service today as it introduced iTunes Match. For $24.99 a year, iTunes will scan a user’s mobile gadget or hard drive, identify its recordings — including those copied from a …
Ukrainian-born billionaire industrialist Len Blavatnik has kicked the tires of many movie companies in recent years. His privately held U.S.-based Access Industries was the backer of Stewart Till’s 2009 purchase of Icon UK film and entertainment business from then owners Mel Gibson and Bruce Davey. You also may recall that ”The Russian” (though his flack Mike Sitrick hates it when I refer to the Harvard-educated naturalized American citizen as such) was one of the bidders for MGM but only wanted to make a recapitalization/restructuring offer, meaning that it wasn’t an all-cash offer as requested by the investment bankers. Then again, Blavatnik loves a distressed property he can own or invest in at a bargain, which is how he amassed his global conglomerate of industrial, chemical, real estate, and media properties. He already was an investor in Warner Music Group and you can’t get more distressed than the recording industry these days. Now his Access will buy Warner Music for $8.25 a share in a transaction valued at $3.3 billion. The deal includes Warner’s entire recorded music and music publishing businesses. The purchase is expected to close in the third quarter.
Said to be worth in excess of $7 billion, Blavatnik managed to fly largely under the media radar until his involvement with Hollywood’s MGM and Icon UK. Founded by Blavatnik in 1986, Access Industries’ other media holdings include majority stakes in Perform Group (the online sports broadcaster), TopUpTV (a UK-based digital terrestrial TV service provider), and Amedia (an entertainment TV content developer and producer in Russia) together with minority stakes in RGE Group (an Israeli TV production company). At a company conference in 2005, he reportedly told senior execs: “Basically the idea is we buy low and sell high. We are here to make money.” Here’s the news release:
EXCLUSIVE: This is exactly the kind of information that shareholders of Big Media need to know but rarely see. It’s considered a red flag when any public company pays one of its bigwigs – usually the CEO – three times more than the average for the four other top executives which the SEC requires them to list. So I’ve taken proxy statements and done the computations and discovered that at least 16 of 35 companies failed that test. Often miserably. Nearly half of the media company compensation packages disclosed so far for 2010 show a startling degree of hero-worship as boards of directors pay their top dogs sums that far exceed what the pay was for other top execs in the company.
Stock grants accounted for big chunks of the compensation for those who top this list, including Discovery Communications CEO David Zaslav, Viacom CEO Philippe Dauman, DirecTV CEO Michael White, Nielsen CEO David Calhoun, and CBS chief Les Moonves. Radio station owner Entercom was off the charts: CEO David Field’s $9.1 million compensation was modest by media company standards but still 25.4 times bigger than average for the company’s other four executives. It includes $7.9 million from stock grants that only pay off if Entercom shares rise to hit certain target prices.
Still, corporate governance experts who focus on what’s often called “CEO centrality” say that an out-of-whack pay package is bad news for shareholders. It indicates that the board of directors may be in the pocket of a CEO – or believes he or she has near super-human power to help the company succeed. In either case, the board is likely to give the CEO all the credit when things go well, and blame others when they go badly. Research shows that usually hurts the stock price over time.
I’ll track this and other measures of lop-sided pay as other media companies release information for 2010. But there are a few things to keep in mind: The SEC reporting rules only cover the top-paid executives of publicly traded U.S. companies. That means we probably won’t know how much privately held Hearst pays CEO Frank Bennack, or how much Japan’s Sony pays CEO Howard Stringer. It also means that we’ll miss a lot of highly paid people who work at subsidiaries of a big company; Universal Studios’ Ron Meyer may be a big deal in Hollywood, but he was a relatively small fish last year at parent company General Electric.
To make comparisons in our list here as fair as possible, we looked at the compensation for the five most highly paid employees for 2010. Sometimes companies report the pay for more than five people — for example, when a top executive is replaced during the year a corporation will include the incoming and outgoing person’s compensation. And the pay data given the SEC can spike in a year when an executive cashes in stock or collects deferred compensation. So here’s how the companies stack up, with the top paid executive’s 2010 reported compensation and comparison to the average (median) pay for the four other highest-paid honchos:
1. Entercom: David Field. The son of company founder Joseph Field became CEO in 2002, about 15 years after leaving his job as an investment banker at Goldman Sachs. Field made $9.1 million last year – the total of his $791,723 salary, $444,308 bonus, $7.9 million in stock, and $28,000 in other perks including medical insurance premiums. That’s a 348% raise in a year when company shares appreciated 53.2%. Though considered a strong operating executive, his salary stands out because it’s 25.4 times higher than the $358,692 average for the four other top executives listed in Entercom’s proxy statement. Field’s salary and the $3.9 million paid to CFO Stephen Fisher accounted for 93% of the $14 million that Entercom paid to its top five executives.