Can the Music Industry
Stop the Bleeding?

Interscope Tops the Charts

One Man's Opinion

Reprinted from Hits Magazine

Could the music business be in turnaround?

With this week's strong RIAA piracy initiatives and continued enthusiasm over Apple's iTunes online Music Store up and running, bizzers hope the latest uptick in its fortunes has come in time to increase the valuation of in-play entities like Universal Music Group, Warner Music Group and Bertlesmann Music Group.

UMG President/COO Zach Horowitz is "cautiously optimistic," telling Reuters, " There's a lot of good signs that a turnaround is beginning. We're all tremendously pleased by the impact of the Apple service."

The news couldn't come at a better time, with UMG, home to such acts as Eminem and U2, now being considered for sale as part of an auction of Vivendi Universal's U.S. entertainment assets.

Reports persist that VU, which prefers to sell its entire company, is giving special consideration to the bids that include the Music Group by Seagram's Edgar Bronfman Jr., oil tycoon Marvin Davis and cable TV magnate John Malone’s Liberty Media Group. The latter reportedly only added UMG to its offer to give it equal footing with its competition. Other prospective buyers include GE and MGM Studios, who have expressed no interest in the company's music holdings.

UMG chief Doug Morris and Universal Studios head Ron Meyer are both reportedly urging the VU board to consider the Bronfman bid, despite the fact their Vivendi stock is virtually worthless after the Canadian liquor heir sold the company to the French water conglom in 2000.

Analysts expect bidders to value Universal's music business at around $5 billion to $6 billion, just five to six times its 2002 earnings before interest, taxes, depreciation and amortization. That valuation is sharply down from the $10.4 billion Bronfman paid for PolyGram in 1999.

Although it is unclear whether Vivendi will sell, hang on to its music unit or wait for a recovery to lift valuations, any buyer would be getting a company that could be poised for a rebound, analysts said.

Edison Media Research’s Larry Rosin told Reuters: "For someone with the right vision, it's probably a very good time to buy a music company, particularly if it's being discounted. With all the incredible changes the music industry is going through right now, change implies opportunity for someone who knows how to seize it."

Although Edison's study found 61% of 12-to-17-year-olds have burned a copy of someone else's CD instead of buying their own, it also discovered. 50% of Americans between 12 and 44 believe downloading for free is morally wrong, up from just 39% in 2002.

The industry's success in the courtroom and its PR campaign are helping. By targeting individuals and offering alternatives like Apple's service on more widely used Windows-based systems later this year, the biz is looking to reverse its fortunes.

"The consumption of music has never been greater. It's just that it's not monetized," Horowitz told Reuters. "I think we will have two or three years of transition, after which, the potential of the Internet will explode and we will have significant revenue, the likes of which we haven't seen in many years now."

From Zach’s mouth to God's ears. And not by way of KaZaA, either.

Meanwhile, EMI, WMG and BMG have all been involved in on-again, off-again merger talks of their own. Any signs of recovery could affect these companies' valuations and any potential deals on the table.

Sony Corp.U.S. chief Howard Stringer struck an optimistic tone earlier in the week, when he told a symposium: "The music business invariably has been up and down and come back. There is no question the way the music companies are attacking the problem shows the first glimmers of hope."

HITS magazine is the most powerful information vehicle in the music industry, and is read religiously by all the top executives and everyone else.

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Just how hot is Interscope Records these days? Well, just a few weeks ago they became the first record company of the decade to hit the trifecta by locking up the top three slots on the Billboard Top 200 album charts with CDs from Marilyn Manson (#1), 50 Cent (#2) and Cold (#3). Oddly enough, the last label to accomplish this same feat was also Interscope back in 1996 when Bush, Snoop Dogg and No Doubt topped the charts. Congratulations to Jimmy Iovine (Interscope-Geffen-A+M Chairman). Prior to 1996 you have to go all the way back to '89 when MCA led the pack with Fine Young Cannibals, Bobby Brown and Tom Petty. Want more? How about the Top Four? During the week of February 14th, 1974, releases from Bob Dylan (Desire), Paul Simon (Still Crazy After All These Years), Earth, Wind & Fire (Gratitude) and Chicago's Greatest Hits took the Top Four chart positions.

If you're interested in how the music business is doing in terms of overall record sales, we can help you out. As of the beginning of June, CD sales are down about 8.7% and singles sales are off a whopping 37.2% over last year. Looks like the plan to rejuvenate the single isn't going too well. Sadly, CD sales at Mom + Pop and Independent record stores are also down 20.7%. Not very encouraging, so you new artists out there better start working on your CDs. You are the future of this business!

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If you live long enough, you wind up having an opinion on just about everything. If you're a journalist, you get to tell everyone what your opinion is--even though they didn't ask for it and really don't care.

This month, my opinion concerns celebrity recording artists mixing political views with music. In other words, should recording artists continue to make political statements to the press -- kinda what the Dixie Chicks did when Natalie said she was ashamed of President Bush for the war on Iraq.

Do I really care if Bruce Springsteen (for example) votes Democratic or Republican? I don't, but just let him go to Rolling Stone and his political views become Page One News! I love Springsteen for his music not his views. The Boss is a singer, songwriter, recording artist and performer. His political views are his personal belongings, not mine. When I go to my doctor for a physical, I want to turn my head and cough and not hear why Bush ruined the economy.

The problem is that these celebrity-types know the press jumps at the controversy of printing political views. For every famous celeb who comes out as a Democrat, another comes out as a Republican a day later to snatch the spotlight away. I couldn't care less.

Would this be news at all if Springsteen was a delivery man for Federal Express? Of course not. Furthermore, the political views of a celebrity are no more important than yours or mine. Regardless of how many millions of records he sells, a Grammy award winning artist can only cast a single presidential vote. Natalie the Dixie Chick can only cast a single presidential vote. What the press is really saying is that our opinion isn't newsworthy because we're not famous.

When I was a kid growing up in Brooklyn, I was taught to never discuss religion or politics in public. It was good advice then and it's even better advice now. I'd like to give that same advice to all of the celebrities who feel that their fame gives them the right to mix politics and music in public.

There oughta be a law against it, but that's just one man's opinion.

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