Post by Slim K team on May 10, 2005 12:19:11 GMT -8
[glow=red,2,300]'Linkin' Park' contract threat bad timing for label ... [/glow]
By Brian Garrity/Reuters/Saturday, May 7, 2005; 5:38 AM
NEW YORK (Billboard) - Linkin Park's demand to be released from its Warner Music Group contract on the eve of the major label's planned $750 million initial public offering is drawing mixed responses from the artist management community.
The band, which is managed by Rob McDermott of the Firm, cites a crisis of confidence over WMG's use of IPO proceeds and its ability to compete on the global stage in the wake of the deal as the reasons it wants out.
However, Linkin Park's decision to take its case public also comes as it has hit an impasse in contract renegotiations with its Warner-owned label, Warner Bros. Records.
Artist managers interviewed by Billboard say that while the band's stated concerns may have merit, the move is as much a contract bargaining chip as anything.
Linkin Park is said to be seeking a new contract with an advance of $60 million; Warner Bros. is offering $15 million in advance for a five-album deal, sources say. Linkin Park previously renegotiated its deal with Warner in 2000.
"It's 'Show me the money,"' one manager speaking on condition of anonymity says of the band's position. "There could be validity to Linkin Park's claims," the manager adds, "but none of us really know. Have all labels gone from trimming fat to trimming muscle? Yes. Have they all cut so deeply that they can't do the job anymore? Probably yes."
Entertainment attorney Gary Stiffelman, who represents Warner acts like the Doors and Fleetwood Mac, says a significant pool of shares should be set aside for the artists as a reward, just as any key executive typically is rewarded in similar circumstances.
"A significant component of the purchase price often reflects the anticipated value of the product these artists remain committed to deliver," he says.
A public contract feud with one of its biggest acts just days ahead of an IPO is the last thing WMG wants. The deal is tentatively expected to proceed May 10 with an estimated price of $22-$24, sources say.
The company finished third among the major labels in total and current market share last year with 14.7% and 13%, respectively. It saw its U.S. market share slip to 14.9% in the first quarter, compared with 15.4% in first-quarter 2004, according to Nielsen SoundScan.
Meanwhile, Linkin Park has sold more than 35 million records worldwide in five years. It owes four albums on its existing contact.
Whether the spat affects the WMG IPO or its pricing remains to be seen. Sources familiar with the situation point out that the announcement hit just before a key WMG roadshow meeting with investors in New York.
Further complicating the situation is the Firm's connection to WMG's lead investors, Thomas H. Lee and Bain Capital. Firm founder Jeff Kwatinetz was an adviser to Thomas H. Lee's Scott Sperling ahead of the WMG purchase, and late last year the two private-equity powers acquired a minority stake in the Firm.
Those same investors were identified in Linkin Park's May 2 press release requesting its release from WMG.
"The new owners of the Warner Music Group will be reaping a windfall of $1.4 billion from their $2.6 billion purchase a mere 18 months ago if their planned IPO moves forward. Linkin Park, their biggest act, will get nothing," the press release stated. "Of the planned $750 million raised by an IPO, only about $7 million will be put toward the company's own operations, with no money going to WMG artists."
Warner Bros. said in a statement: "While Linkin Park's talent is without question, the band's management is using fictitious numbers and making baseless charges and inflammatory threats in what is clearly a negotiating tactic."
The Firm maintains that its relationship with Thomas H. Lee and Bain Capital has nothing to do with Linkin Park's issue with WMG.
source of Reuters/Billboard
By Brian Garrity/Reuters/Saturday, May 7, 2005; 5:38 AM
NEW YORK (Billboard) - Linkin Park's demand to be released from its Warner Music Group contract on the eve of the major label's planned $750 million initial public offering is drawing mixed responses from the artist management community.
The band, which is managed by Rob McDermott of the Firm, cites a crisis of confidence over WMG's use of IPO proceeds and its ability to compete on the global stage in the wake of the deal as the reasons it wants out.
However, Linkin Park's decision to take its case public also comes as it has hit an impasse in contract renegotiations with its Warner-owned label, Warner Bros. Records.
Artist managers interviewed by Billboard say that while the band's stated concerns may have merit, the move is as much a contract bargaining chip as anything.
Linkin Park is said to be seeking a new contract with an advance of $60 million; Warner Bros. is offering $15 million in advance for a five-album deal, sources say. Linkin Park previously renegotiated its deal with Warner in 2000.
"It's 'Show me the money,"' one manager speaking on condition of anonymity says of the band's position. "There could be validity to Linkin Park's claims," the manager adds, "but none of us really know. Have all labels gone from trimming fat to trimming muscle? Yes. Have they all cut so deeply that they can't do the job anymore? Probably yes."
Entertainment attorney Gary Stiffelman, who represents Warner acts like the Doors and Fleetwood Mac, says a significant pool of shares should be set aside for the artists as a reward, just as any key executive typically is rewarded in similar circumstances.
"A significant component of the purchase price often reflects the anticipated value of the product these artists remain committed to deliver," he says.
A public contract feud with one of its biggest acts just days ahead of an IPO is the last thing WMG wants. The deal is tentatively expected to proceed May 10 with an estimated price of $22-$24, sources say.
The company finished third among the major labels in total and current market share last year with 14.7% and 13%, respectively. It saw its U.S. market share slip to 14.9% in the first quarter, compared with 15.4% in first-quarter 2004, according to Nielsen SoundScan.
Meanwhile, Linkin Park has sold more than 35 million records worldwide in five years. It owes four albums on its existing contact.
Whether the spat affects the WMG IPO or its pricing remains to be seen. Sources familiar with the situation point out that the announcement hit just before a key WMG roadshow meeting with investors in New York.
Further complicating the situation is the Firm's connection to WMG's lead investors, Thomas H. Lee and Bain Capital. Firm founder Jeff Kwatinetz was an adviser to Thomas H. Lee's Scott Sperling ahead of the WMG purchase, and late last year the two private-equity powers acquired a minority stake in the Firm.
Those same investors were identified in Linkin Park's May 2 press release requesting its release from WMG.
"The new owners of the Warner Music Group will be reaping a windfall of $1.4 billion from their $2.6 billion purchase a mere 18 months ago if their planned IPO moves forward. Linkin Park, their biggest act, will get nothing," the press release stated. "Of the planned $750 million raised by an IPO, only about $7 million will be put toward the company's own operations, with no money going to WMG artists."
Warner Bros. said in a statement: "While Linkin Park's talent is without question, the band's management is using fictitious numbers and making baseless charges and inflammatory threats in what is clearly a negotiating tactic."
The Firm maintains that its relationship with Thomas H. Lee and Bain Capital has nothing to do with Linkin Park's issue with WMG.
source of Reuters/Billboard
