Entertainment Industry

Category: Music

SiriusXM fights Liberty Media takeover move

Mel Karmazin John Malone

Did Sirius XM Radio Inc. make a Faustian bargain when it decided to accept $530 million from Liberty Media Corp. to stave off bankruptcy in early 2009? 

The New York-based satellite radio company filed a petition late Friday afternoon with the Federal Communications Commission, urging that the agency deny a request by Liberty Media Corp. that sought to transfer several of SiriusXM's operating licenses to Liberty's control. Liberty owns 40% of SiriusXM and occupies five of its 13 board seats.

Liberty's request, filed March 20, include SiriusXM's earth station licenses and its terrestrial repeater license. The FCC requires SiriusXM to have all three licenses to operate. 

But SiriusXM fought back, arguing in a 24-page petition that Liberty failed to get proper signatures from the company’s board for its transfer request.

“This is the equivalent of trying to cash an unsigned check and explaining the lack of a signature by saying nothing more than the account holder refused to sign it,” SiriusXM's attorneys wrote.  

Liberty Media's intent, and the intent of Chairman John Malone, is unclear. The company did not state a reason for seeking control of those licenses and messages to Liberty Media's spokeswoman were not immediately returned.

At issue is whether Liberty's 40% stake in SiriusXM allows Malone to assume ownership of the satellite radio company, which last year earned a $427-million profit on more than $3 billion in revenue. 

What's clear is that SiriusXM's last-minute arrangement with Liberty averted financial disaster, allowing the New York satellite radio company to make a $172-million payment on its high-interest loans just days before it was due in February 2009. The transaction also gave Liberty Media five of 13 seats on the company's board.

The deal also barred Liberty Media from trying to take over SiriusXM by acquiring 39.9% or more of SiriusXM's stock. That provision expired March 6.

"The expiration of the Investment Agreement Provisions does no more than remove certain barriers to Liberty Media's ability to take additional steps to acquire control of SiriusXM," SiriusXM's lawyers argued. "The SiriusXM Board controls the company, and Liberty Media's current minority representation on the board does not give it the ability to control SiriusXM." 

(Eddy W. Hartenstein, publisher and chief executive of the Los Angeles Times and CEO of its parent, Tribune Co., is also a SiriusXM board member.)

Malone has a history of not-so-friendly takeovers. In 2004, he locked horns with Rupert Murdoch over control of News Corp. The lengthy battle ended in 2006 when Malone agreed to give up Liberty's 16.3% stake in News Corp. in exchange for 38.5% share in DirecTV, along with half a billion dollars in cash and three regional sports networks.

In the current clash of the media titans, it's now Malone's turn to make a move.

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-- Alex Pham

Photos: SiriusXM Chief Executive Mel Karmazin, left, and Liberty Media Chairman John Malone appear to be duking it out over control of SiriusXM. Credit: Sirius XM Radio Inc. and Liberty Media Corp.  

AFTRA board scales up its fight against music labels

DancersThe fight between performers who work on music videos for artists such as Lady Gaga and Justin Timberlake and music labels escalated Saturday.

The national board of the American Federation of Television and Radio Artists voted to give their representatives authority to issue a do-not-work-order against music labels or producers if the parties are unable to reach an agreement in contract negotiations.

For more than a year, AFTRA has been trying to secure a union contract deal with music companies that would provide minimum pay and benefits to dancers and others who perform in music videos. The union argues that the need for such an industrywide contract has increased as the music video industry has grown, thanks to the popularity of performers such as Madonna and Beyonce and online video services such as Vevo. But the talks, which were last held in January, have so far been unsuccessful, leading to the current standoff.

Earlier this year, dozens of members of the Los Angeles dance community held a rally and a flash mob performance, set to the tune of Aretha Franklin's hit "Respect," outside the offices of Sony Music Entertainment in support of efforts by music video performers to secure a union contract.

The vote comes just days before members of AFTRA are set to vote on a merger agreement with the Screen Actors Guild.

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-- Richard Verrier

Photo: Music video performers do a flash mob dance during a Jan. 6 rally in Beverly Hills. The rally was organized by The American Federation of Television and Radio Artists. Credit: Ricardo DeAratanha / Los Angeles Times

MOG is in acquisition talks with Beats Electronics and HTC

David Hyman MOG
MOG Inc., an on-demand music service based in Berkeley, is in talks to be acquired by headphone company Beats Electronics and Taiwanese cellphone manufacturer HTC Corp., according to an industry executive familiar with the negotiations.

A MOG spokesperson did not return calls seeking comment, and a representative for Beats could not be reached.

MOG, which launched its service two years ago, has struggled along with several other digital music services to find an audience. The company does not disclose its subscriber figures, but music executives familiar with the service say MOG has fewer than half a million paying customers.

Beats, based in Los Angeles, was created by musician Dr. Dre and Jimmy Iovine, chairman of Interscope Geffen A&M Records, in 2006 as a seller of premium headphones, called Beats by Dr. Dre, manufactured by Monster Cable Products Inc.  Monster, Hewlett-Packard Co., Chrysler Group and HTC are also partners in Beats.

Purchasing MOG would allow Beats and HTC to package a music service with their devices, making their products more appealing in the hypercompetitive world of mobile electronics.

The discussions are preliminary and may not lead to a deal, said an executive who asked not to be identified because the talks were confidential.

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-- Alex Pham

Photo: David Hyman, chief executive and co-founder of MOG. Credit: Alex Pham / Los Angeles Times.

 

 

Pandora stock drops 19% on rising loss, falling revenue estimate

Tim Westergren

Investors slammed Pandora Media Inc. and shares dropped 19% Tuesday after the Oakland online radio company reported a higher-than-expected loss and projected that its current quarter revenue would decline.

Pandora's shares plunged Tuesday, retreating as much as $2.73 to $11.54 in after-hours trading following the company's announcement of its financial performance. It had closed earlier at $14.27, down 39 cents.

Although its fourth-quarter revenue grew 71% to $81.3 million from $47.6 million a year earlier, Pandora's losses widened to $8.2 million, from a $1.4 million loss in the year-earlier period. Pandora also projected that its sales in the current first quarter would be between $72 million and $75 million, dropping by as much as 11% from the previous quarter.

Pandora receives close to 90% of its revenue from advertising, with the remainder coming from subscribers who pay $36 a year for the ad-free premium service.

"Everyone is asking: Why is revenue so low? Why are they losing so much money?" said Michael Pachter, a media analyst with Wedbush Securities. "The answer is that they weren’t focused on selling ads."

Instead, Pandora concentrated its energies persuading car manufacturers to build its Internet music streaming service technologies directly into the dashboards of new cars, Pachter said.

Believing that the way to grow is to capture listeners while they are in their cars, Pandora has worked closely with companies such as Ford, Toyota, Mercedes-Benz and others to design its service into new vehicles. But car manufacturing cycles take years, and Pandora's efforts today may not bear fruit quickly enough for impatient investors on Wall Street.

The stock debuted on June 15 at $16 a share, but sank to $13.26 the following day.

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Photo: Pandora co-founder Tim Westergren. Credit: Ryan Anson / Bloomberg  

-- Alex Pham

 

 

 

Google Play unifies books, music, movies, games

Jamie Rosenberg Google

With Google Play, the technology giant wants entertainment consumers to come play in its digital sandbox.

Seeking to create a single destination for digital media and entertainment, the Mountain View, Calif., company on Tuesday said it is pulling together its disparate books, music, movie and game efforts under one umbrella dubbed Google Play.

The initiative involves Google Music, Google Books and Android Market in such a way that visitors to those sites will be redirected to a single page, on tablets and cellphones that run Google's Android operating system as well as on Web browsers.

With tabs for music, books, movies and applications, Google Play mirrors similar efforts by Apple Inc., Amazon.com and Microsoft Corp. to become an entertainment and media hub. For a full report, see the story on our Technology blog written by Jessica Guynn.

"What we’re seeing is that consumers are identifying with ecosystems, which includes devices and a broad offering of services," said Jamie Rosenberg, Google's director of digital content. "So we're creating this notion that the consumer has a single relationship with Google as the ecosystem for their content."

 

Google Play Web

Rosenberg said unifying Google's various media initiatives also would benefit its content partners. A movie release with tie-ins to books, games and soundtracks could, for example, take advantage of Google Play's unified approach.

"It’s also a foundation for many things that we’d like to do in the future," he said. "Integrated merchandising is just one example that is enabled by this experience."

Android application developers said they welcome Google's changes, believing that the improvements in the user experience will help people find and use more of their products.

"The improved look and flow will make it easier for people to find games," said Adam Flanders, senior vice president of sales and marketing for Glu Mobile Inc., a San Francisco developer of more than 30 Android games such as Stardom and Contract Killer Zombies. "That’s great for us."

With more than 450,000 applications in Google's Android app market, triple the number from a year ago, developers are grateful for anything that can help boost their visibility.

By combining Google audience for all media, Flanders said his company can get in front of more potential customers.

"If they’ve got more eyeballs in the store looking for all kinds of content, there’s a higher probability of people finding one of our games," Flanders said.

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Top photo: Jamie Rosenberg, Google's director of digital content, at the Google Music launch event last year in Los Angeles. Credit: Los Angeles Times. Bottom screenshot of Google Play courtesy of Google.

INgrooves buys Fontana Distribution from Universal Music Group

Fontana

INgrooves, a San Francisco digital music distribution company, has purchased Fontana Distribution in Los Angeles from Universal Music Group for an undisclosed sum. 

Fontana specializes in distributing music for independent labels such as Vagrant, Strange Music and Rap-A-Lot. Last year, Fontana handled the distribution for 800 releases, selling about 7.5 million physical records and 3 million digital albums for more than 200 labels. 

The acquisition, which closed Thursday night, significantly beefs up INgrooves’ capabilities. The company, founded by Robb McDaniels in 2002, had focused almost entirely on digital distribution, processing about $1 billion worth of digital music a year through more than 600 online retailers such as Amazon.com, iTunes, MySpace Music, Zune, Deezer, 7 Digital and others.

Fontana enables INgrooves to offer a more complete suite of distribution services -- both physical and digital.

Ron Spaulding, the head of Fontana, will head up INgrooves' physical distribution business in Los Angeles, while Dave Zierler will run the digital distribution operations out of San Francisco, the company said.

For Universal, the sale accomplishes several things. It strengthens INgrooves, in which Universal owns a minority stake. And it divests Universal of a distribution asset, raising a modicum of cash to help it finance its $1.9-billion acquisition of EMI, announced in November.

At the time of the announcement, Universal said it would sell off non-core assets to help finance its purchase and help win regulatory approval in the U.S. and Europe. Fontana, however, is not considered part of the main divestiture, which is expected to kick off this spring once Universal decides which assets to sell. That sale will likely include certain music catalogs, according to executives knowledgeable with the process.

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Photo: The cover of Fontana Distribution's April 2012 new-release catalog, which features the band Candlebox. Credit: Fontana / Universal Music Group

Grammy sales bump for Civil Wars, Bruno Mars, others

Civil Wars at Sunday's Grammy Awards

The return of Adele and a tribute to Whitney Houston helped drive the Grammy Awards to its second-biggest audience ever, but it will still be a few days before the ultimate winners are revealed. With 40 million viewers tuning into CBS' performance-heavy broadcast, the Grammys can still have a career-changing effect. 

An act can walk away from the Grammys a loser and still come out ahead, at least in terms of popularity. Last year folk-rockers Mumford & Sons went 0-2 in their nominated categories, but had a showcase performance with legend Bob Dylan.

FULL COVERAGE: Grammy Awards

Early indications from online retailers such as Apple's iTunes store and Amazon.com foretell large Grammy sales bumps for Bruno Mars, the Civil Wars and Bon Iver. Album of the year winner Adele is leading all Internet sales charts, yet that's no surprise as the British soul star went into the Grammy Awards with 19 straight weeks atop the tally. Rdio, an on-demand digital music streaming service, reported that Adele's songs saw a 68% jump in the hours following her Grammy sweep, while Bon Iver got a 121% boost.

More below-the-radar is rootsy duo the Civil Wars. The act had only 60 seconds of air time on the Grammys, but their debut "Barton Hollow" on Monday morning was the No. 5 bestselling album on iTunes and No. 15 on Amazon. Considering both sales charts are heavy on releases from the late Houston, it would appear the Civil Wars are now reaching a larger audience.

"The Grammy Awards show's broad, mainstream audience is a perfect next step for the Civil Wars' gradual incline of awareness and appeal," said manager Nate Yetton in an email. "As an early indicator, the band's website went from an average of 2,000 to 3,000 hits per day, to over 20,000 hits immediately following their Grammy performance." 

"Barton Hollow" was No. 121 on the U.S. pop chart heading into the Grammy telecast. Apple's iTunes store, which does not release sales data, is the world's largest retailer, and a top-10 showing could have a massive effect on an artist's sales. In the weeks leading up to the Grammys, Yetton said "Barton Hollow" fluctuated between No. 40 and No. 60 on iTunes. 

For some perspective, last year's best new artist winner Esperanza Spalding immediately jumped into the top 10 on iTunes after the Grammys. The jazz artist's "Chamber Music Society" sold 18,000 copies in the week following the Grammys, up from about 3,000 the week prior. 

Other albums from Grammy performers in the top 10 on iTunes and Amazon include Mars' debut "Doo-Wops & Hooligans" and Lady Antebellum's "Own the Night." This year's best new artist winner, Bon Iver, is No. 15 on iTunes. Nielsen SoundScan tracks sales through Sunday evening, meaning the full effect of the Grammys on retail won't be evident for another week.

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Photo: Joy Williams and John Paul White of the Civil Wars perform on the Grammy Awards. Credit: Robert Gauthier / Los Angeles Times 

 

Spotify's Daniel Ek and the music 'dinosaurs'

Daniel Ek Spotify

Less than seven months after launching his digital music service in the U.S., Spotify's Daniel Ek found himself rubbing elbows with the upper echelon of the record industry executives who have descended on Los Angeles for this Sunday’s Grammy Awards.

The 28-year-old Swedish entrepreneur with a boyish face that still hints of baby fat on Friday afternoon addressed a ballroom full of power attorneys in Brooks Brothers and Armani suits — essentially schooling them on the brave new world of digital music.

Ek, pictured above on the right, boldly predicted that revenue from streaming services such as Spotify will in two years return as much revenue to the industry as iTunes does today. Since launching its service in 2008, the Stockholm-based company has remunerated more than $200 million, roughly 70% of its revenue, to labels and publishers.

“The value of music is not $15 billion,” an estimate of annual music sales, Ek told an audience of several hundred at the Grammy Foundation’s Entertainment Law Initiative luncheon as they dined on endive dressed in raspberry vinaigrette. “It’s worth much, much more than that.”

Spotify’s service has caught on worldwide with more than 10 million listeners who tune in at least once a month — 3 million of whom pay around $5 to $15 a month to access premium versions.

Though music labels have embraced Spotify's unusual approach — of offering a generous free version that gives users online access to millions of tracks on demand — the company continues to face skepticism from some bands and musicians who fear that streaming music services eat into album sales.

Bands such as Coldplay and the Black Keys, and performers like Mac Miller, have opted to withhold their new albums from streaming services such as Spotify — at least for the first few weeks after the albums’ releases. (This week some of former Beatle Paul McCartney's songs also became unavailable on Spotify, an apparent result of contractual requirements not related specifically to the streaming service.) Ek emphatically disagreed with those decisions.

“There is no cannibalization,” Ek said before a packed audience in the Crystal Ballroom of the Beverly Hills Hotel. “At the end of the day, I want the music industry to be larger than what it is today. And I believe that the two models [streaming and sales] can co-exist side by side."

As if to punctuate a contrast with Ek's youthful approach, John Branca, veteran counselor to the stars, followed him on stage with the following remark that drew chuckles from the crowd: 

"It’s a popular belief that the music industry is over, that it’s seen better days. Some would say that we lawyers are the dinosaurs of the legal landscape, that paleontology is a better subject for us and that a better forum for this would be the La Brea Tar Pits."

As a prominent music attorney, Branca's clients have included the Beach Boys, the Doors, the Rolling Stones and Carlos Santana. He is also the executor of the Michael Jackson estate.

Branca summed up the challenge for the music industry, pointing out that many of music's greatest stars created their music "before the digital age."

"How do we present these great artists to a new generation of fans?" Branca said. 

One could almost hear Ek replying, "Through Spotify."

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Photo: Spotify Chief Executive Daniel Ek, right, speaking with music attorney John Branca, center, and Josh Tyrangiel, editor of Bloomberg Newsweek, before the Grammy Foundation's Entertainment Law Initiative luncheon in Beverly Hills. Credit: Alex Pham / Los Angeles Times.

Warner's Bronfman vows to 'fight' EMI sale to Universal and Sony

Edgar Bronfman Jr.

Edgar Bronfman Jr., Warner Music Group's former chief executive and outgoing chairman, said his company would oppose the sale of EMI Group to Warner's two biggest rivals, saying the deals would reduce competition.

Bronfman himself had vied to buy EMI's recorded music business last year, but was outbid by Universal Music Group's $1.9-billion cash offer. EMI at the same time also agreed to sell its music publishing operation for $2.2 billion to a consortium of investors led by Sony ATV, a division of Sony Corp.

In a parting shot, Bronfman on Tuesday, his last day as chairman of Warner, told an audience at a media conference in Dana Point that EMI's sale was "dangerous" because the concentration of market share would stifle innovation and reduce payments to musicians they represent. Bronfman said Warner would "fight tooth and nail" to convince antitrust regulators to stop the deals.

A Warner spokesman confirmed Bronfman's comments, made at the D: Dive Into Media conference hosted by the Wall Street Journal, but declined to elaborate on how the company will work to thwart the sale of EMI. Sony also declined to comment on Bronfman's remarks, and messages to Universal were not immediately returned.

The deal, which would reduce the number of major record labels from four to three and the number of big publishing companies from five to four, is currently wending its way through regulatory scrutiny in both Europe and the U.S.

Regulators so far have not raised any antitrust concerns, but aren't expected to make a determination for at least several more months.

Bronfman also took a swipe at Google Music, calling the digital music store an "oxymoron." Warner is the only major label to abstain from selling its music on Google's online store, launched in November. It's unclear how he felt Google's efforts into music were contradictory, but Bronfman followed up his comment by suggesting that the Silicon Valley search giant places more value on the platform delivering content more than the content itself.

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 — Alex Pham

 Photo: Edgar Bronfman Jr. Credit: Chip Somodevilla / Getty Images.

 

Digital music revenue surged 8% worldwide in 2011

Bruno Mars and the Smeezingtons

Sales of music on CDs may be in free fall, but digital music revenue has been climbing steadily, jumping 8% last year, with help from strong performances by artists such as Bruno Mars, according to a report released Monday by the International Federation of the Phonographic Industry.

Digital music sales totaled $5.2 billion in 2011, up from $4.8 billion in 2010, according to the IFPI, a trade group that represents 1,400 music companies worldwide.

IFPI Digital Music Reveue

Although 32% of the music industry's global revenue came from digital sources, such as downloads and subscriptions to music services, some markets derived a far greater share from digital sales. In the U.S., digital music sales in 2011 surpassed sales of music in physical formats such as CDs, vinyl records and cassettes tapes, making up 52% of the industry's revenue. In South Korea, 53% of music revenue was from digital.

Bruno Mars, whose "Just The Way You Are" won him the Best Male Pop Vocal Performance at last year's Grammy Awards, snagged three of the top 10 best-selling digital singles last year. 

IFPI Top 10 digital singles 2011 Bruno Mars LMFAO

As the volume of purchased downloaded music continued to sizzle, growing 17% to 3.6 billion singles and albums last year, the subscription music business took off.

The number of paying subscribers to music services rocketed 65% to 13.4 million in 2011 from 8.2 million in 2010, the IFPI said. In Sweden, where the music streaming service Spotify is based, subscription revenue accounted for 84% of digital music revenue in the first 10 months of 2011.

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-- Alex Pham

Photo: From left, Philip Lawrence, Ari Levine and Bruno Mars -- a songwriting and production team known as the Smeezingtons --  at their recording studio in Hollywood. Credit: Chris Pizzello / Associated Press

 

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