It only took new owners and cost cutting.


Warner sings
a happy tune



BY PHYLLIS FURMAN
DAILY NEWS BUSINESS WRITER


Country music stars Big & Rich has been one of Warner Music's top-selling acts this year.

Edgar Bronfman Jr.'s Warner Music Group danced closer to an IPO yesterday, reporting improved profits in the first 10 months of the year.
The music giant behind superstar acts like Madonna, Big & Rich, Linkin Park and Josh Groban, said its operating profits nearly tripled to $219 million. The company is set to save $250 million annually, thanks to a major cost-cutting drive.

Now, it can start investing in new talent and new deals.

Moreover, Bronfman is expected to try to capitalize on the results by taking Warner Music public next year. The ex-Seagram chief bought the music giant earlier this year from Time Warner with the backing of Thomas H. Lee and other private equity firms.

But while Warner Music's profits are growing, its sales rose just 2% in the period to $2.5 billion. They would have been down 3% if a weakening dollar hadn't made them look better.

Warner Music's share of the U.S. market, year to date, slipped to 14.5%, compared with 16.4% last year, according to Nielsen Soundscan.

But yesterday Bronfman noted on a conference call with bondholders that Warner Music has the No. 1 record in the country this week with Linkin Park's "Collision Course."

Warner Music's sales slump comes after a major restructuring that involved dumping some 250 underperforming artists from its roster, delaying some releases and merging its two New York-based labels, Atlantic and Elektra.

It remains unclear whether Warner Music will be able to ramp up sales. CD sales in the U.S., which began to recover this year after three years of wrenching declines, are already looking weak again in the fourth quarter.

"There's no question (Bronfman's) done a great job cutting costs," said John Rose, former executive vice president of music giant EMI who's now a partner at Boston Consulting Group. "The question now is how will the company perform moving into the new year."

Warner Music reported results for the first 10 months of the year because it has switched its year-end to Sept. 30 from Nov. 30.

Originally published on December 14, 2004