Warner Music CEO Comments on EMI Auction

NEW YORK - New Warner Music Group CEO Stephen Cooper on Thursday said that the music major saw "significant" synergy opportunities in a possible acquisition of EMI's recorded music business, but remained disciplined in the auction to ensure an "adequate return."

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"As disciplined investors, we were not willing to pay a price for EMI that would not have provided an adequate return on our investment," he said.

If Universal Music's proposed deal for the recorded music portion of EMI gets regulatory approval, WMG would be just fine, he signaled, saying that WMG owner Access Industries has indicated it bought the firm this year under the assumption that it would be a successful standalone business - with or without further deals.

He added that Len Blavatnik-led Access Industries has a long-term view on its WMG investment.

Cooper also said that WMG would continue to "seek smart, strategic opportunities to drive growth, but only as they fit with our financial metrics and model." Any deals must keep its "conservative approach" to its debt structure in place, he added.

Cooper's comments came on his first WMG earnings conference call and were the first public remarks since EMI struck the Universal deal and an agreement to sell its music publishing arm to Sony Music.

Cooper also echoed a recent suggestion by Universal Music top executives that the U.S. recorded music business may be in the early phases of a turnaround.

After years of declines, the U.S. recorded music industry seems to be beginning to show positive signs. Despite a slight fourth-quarter dip, sales are up 4 percent year-to-date, Cooper said, adding that he was "hopeful that these positive trends [would] continue."

He also signaled no interest in splitting up WMG's music publishing and recorded music units. Both are "viewed as integral parts of this business," he said, suggesting that the relationships and interactions between the two would grow stronger. He emphasized that there would be "dividends" from the two being under the same roof.

Highlighting that he was restricted by a confidentiality agreement with EMI that WMG was still under, Cooper told analysts on Thursday that if the Universal-EMI deal does go through, the music landscape would surely be different. But he said it was difficult to predict how that acquisition would work its way through the regulatory process and what conditions regulators may put on the companies.

Access looked at WMG as "a self-contained universe" and saw it yield "meaningful results as a standalone company," and the Universal-EMI deal likely has not changed that view, Cooper emphasized though.

Asked if WMG could pick up any businesses that Universal may end up divesting, Cooper said any such speculation would be "somewhere between pointless and reckless."

Asked about WMG's under-performance this year compared to peers that have gained market share, Cooper said: "Frankly, the [release] schedule this year was light." Plus, WMG "fell short" of expectations in key releases, he added.

In its current fiscal year, which started in October, he said WMG has a "very nice" release schedule, and early trends look encouraging, which could allow the firm to "claw back" some market share, the CEO said. But he said that market share is only one metric that management uses to evaluate its performance.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai