Lyor Cohen To Head WMG U.S. Division

Sony Earnings Dive, Time Warner Returns To Profit

One Man's Opinion

Reprinted with permission from Hits Magazine

January 26, 2004

It's a done deal, and a blockbuster at that. Island Def Jam chief Lyor Cohen has accepted the post of chairman and chief executive of the U.S. unit of the newly constituted Warner Music Group under Edgar Bronfman Jr. Cohen will join the company once Bronfman's consortium closes its acquisition of the company from Time Warner within the next two weeks.

The deal includes an equity stake in Warner for Cohen, or as he explained it to the press in a conference call, "If they are successful, I will be successful... I was presented with an extraordinary opportunity to continue growing my career. I know everybody is encouraging me to take the next step in my career."

Sources say that Cohen turned down a five-year, $50 million offer to remain at Universal because it could not offer him a share in the company.

In a statement, Bronfman, Cohen and Roger Ames were aflutter with excitement.

Said Bronfman: "Lyor Cohen's role in revolutionizing, transforming and challenging the music industry over the past two decades cannot be overestimated, and I am very pleased that he will be joining Roger and me at Warner Music Group to lead the Company's recorded music operations in the U.S. As one of the most respected executives in the business, Lyor's in-depth experience and proven track record will play an invaluable role in WMG's efforts to become the world's greatest independent music company, and we are excited about the opportunities that lie ahead for all of us with this great team."

Cohen added: "This has probably been the most difficult decision I've ever had to make in my professional life. I've spent the last 20 years building Def Jam into one of the most important teenage brands in history. I am very grateful to the people and artists at Def Jam and the Island Def Jam Music Group. I'm going to miss the leadership and camaraderie of Doug Morris and his team at Universal. I'm looking forward to this new challenge, working closely with Edgar Bronfman Jr., Roger Ames and the great executives and artists at Warner Music Group.

"Both Edgar and Roger are incredible executives who, at different stages in Def Jam's history, believed in Russell and me and had the vision to see how important Def Jam would become. Roger, with his belief in our artists and our vision, led the explosive growth and transformation of the label when PolyGram acquired 50% of the label from Sony in 1994. Edgar was also among the first to recognize Def Jam as an important urban music company when, at the helm of Universal, he acquired the remaining 50% in 1999. They trusted in my abilities to architect what today is the new Island Def Jam. Together at WMG we will make a great team."

Warner Music Group Chairman/CEO Roger Ames said: "Having known and worked with Lyor for more than two decades, I'm delighted that he will be joining Warner Music Group. Lyor has been a driving force behind some of the industry's most successful artists, and his pioneering spirit is a welcome addition at WMG. His energy and legendary creative instincts will be instrumental in sustaining the momentum our U.S. labels have achieved over the past several years, enabling Edgar and me to focus on the future direction of Warner Music Group and the strategic growth of our operations on a global basis."

Thomas H. Lee Partners managing director Scott M. Sperling said: "Despite the immediate challenges in this industry that Warner Music Group must address, there continue to be substantial opportunities for growth over the long term. Lyor will be instrumental in helping the company take advantage of these opportunities and realize its full potential."

A statement from Universal Music Group thanked Cohen "for his many valuable contributions over the last several years... [We] wish him only the very best in his new endeavor." It also said they would announce plans for Island Def Jam shortly.

In a statement, Cohen's longtime business partner Russell Simmons said: "Lyor Cohen runs things in a way the other guys can't. When most people throw money at things, Lyor throws creativity. You have to find new ways to do things. You have to be creative. The whole business needs to be revamped and Lyor knows how to do this and that's why this new job is perfect for him."

Under the guidance of the Boston Consulting Group, WMG is in the process of preparing for cost-cutting measures to trim an expected $250-300 million from the company.

There is no indication how Cohen's hiring will affect current WMG chief Roger Ames, whose fate is still undecided, or Cohen's longtime colleagues, Def Jam President Kevin Liles and Island President Julie Greenwald, whom inside sources say may remain at the label. There's also speculation that recent free-agent L.A. Reid is in talks to replace Cohen at IDJ.

Cohen did tell the press that he would not be bringing any IDJ execs with him, adding, "As far as I'm concerned, there's a bunch of breaking artists at the companies and the executives need to focus on that company and do a good job for them. I think this is a great opportunity for those left at the company to really get their shine and do a great job."

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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Reprinted with permission from Hits Magazine

January 28, 2004

Sony reported a 26% drop in earnings for its latest quarter ended December 31, thanks to restructuring costs and weaker profits from hardware, movies and games, all of which offset—get this—improvement in music.

Time Warner, meanwhile, said it returned to profit in Q4 2003 after having reported a near-$45 billion loss due to writeoffs related to America Online—and stopped reporting results for Warner Music Group, which within days will be owned by a private investor group led by Edgar Bronfman Jr. and Thomas H. Lee Partners.

Sony reported earnings of 92.6 billion yen ($875 million) for the quarter, down from 125 billion yen in 2002. Revenue, however, increased slightly (0.7%) to 2.3 trillion yen ($22 billion).

Sony has recently cut 12% of its work force (about 20,000 jobs) as it attempts to remain competitive and struggles to come up with the next Walkman.

But now for the good news: Sony Music Entertainment's operating income for the quarter increased 50% to 30.3 billion yen ($286 million), compared to 20 billion yen a year earlier, even though sales decreased by 3 percent. The company attributed the increase in profitability to lower advertising, promotion and overhead expenses as the music division undergoes continued belt-tightening.

Time Warner, meanwhile, reported net Q4 earnings of $638 million, or 14 cents a share—a penny under the per-share figure analysts expected. Nevertheless, it compares favorably to last year's $10.04 loss per share. Revenue rose 6% to $10.9 billion.

While TW did not report results for WMG, it did say that putting the $2.6 billion from Edgar Bronfman Jr. and partners is in the bank will enable it to trim the company's overall debt to a target level of about $20 billion (down from $25.8 billion at the end of 2002) nearly a year early.

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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Well, last year certainly ended with a bang as Michael Jackson and his alleged child molestation charges grabbed all of the headlines. The trial will be making headlines for months to come but don't look for it to spark CD sales.

Not to be outdone, Britney Spears, deciding to make a mockery of Holy Matrimony, tied the knot with boyhood friend Jason Alexander (no, not the Seinfeld co-star), and then abruptly untied it the next day. The annulment was based on the fact that both bride and groom claimed they didn't quite understand each other's similarities and differences and they made a serious mistake. Duh! First she admits to having had sex with Justin Timberlake (who wouldn't) then goes and marries a local kid for the hell of it. Some people have too much time on their hands.

Year-end sales and rental winners in DVDs and VHS are as follows: Top DVD Sales: Finding NEMO; Top DVD Rentals: The Bourne Identity; Top VHS Sales: Lilo & Stitch; Top VHS Rentals: Sweet Home Alabama; Top Music Video sales of 2002: The New Breed by 50 Cent.

If you wanna hear a really great song that's well written, well produced and has killer vocals, check out the single called "I Can Only Imagine" by MercyMe on Curb Records. It's being passed off as a country record but it's pure pop with a touch of religion. The production is awesome.

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