A Real Green Day for Warner Music Execs

You may wonder, as many have, what the heck is going on over at the new Warner Music Group.

You also may wonder how the record business is in such turmoil. Staffs have been cut and sales are way down. Good acts aren't getting signed and old acts are being released from label deals.

A recently published SEC filing may shed some light on these issues.

After Edgar Bronfman and his investors bought the company from Time Warner, few chart hits were registered, but over a thousand people were let go. The hits the company did have — with Green Day, Linkin Park and Josh Groban — were left-over acts signed by the prior Warner management.

Now it turns out that even if the hits aren't coming, new Warner execs are enjoying the fruits of their predecessors' labors. The recent SEC filing shows that for the year ending Sept. 30, 2004, the company had $7 million in operating income.

For the same period of time, the top five execs in management received a total of $22 million in salaries and bonuses.

The funny thing is, 1,000 people employed at a nice salary of $100,000 apiece would come to only $10 million. In other words: Keeping the laid-off workers and halving the execs' pay would have balanced the whole thing out nicely. I'm sure the execs wouldn't have minded.

Ironically, one of the top earners was Lyor Cohen, the company's new president. His bonus of $5,238,839 and salary of exactly $1 million is enough to cover the damages he was ordered to pay last year in a judgment won by TVT Records against him and his former employer, Universal Records.

Originally the damage award was for $132 million, with Cohen responsible for half. But an appeals court cut that down to a more manageable $3 million.

Cohen claimed he didn't make that kind of money — but thanks to his new bosses, he has it.

The other top earners at the new Warner Music Group were Edgar Bronfman Jr., Paul-Rene Albertini, Les Bider and David H. Johnson.

And if you're wondering how the Warner group is feeling about its future, they list some "risk factors" for potential investors. You'd think that for $22 million, the outlook might be a little rosier. But guess again. Bronfman et al are into the undersell, so don't get your hopes up.

Among the highlighted risks:

— Our internal controls over financial reporting may not be adequate and our independent auditors may not be able to certify as to their adequacy, which could have a significant and adverse effect on our business and reputation.

— Our outside auditors have identified weaknesses in our internal controls that could affect our ability to ensure timely and reliable financial reports.

— The recorded music industry has been declining and may continue to decline, which may adversely affect our prospects and our results of operations.

— There may be downward pressure on our pricing and our profit margins.

— Our prospects and financial results may be adversely affected if we fail to identify, sign and retain artists and songwriters and by the existence or absence of superstar releases and by local economic conditions in the countries in which we operate.

— We may have difficulty addressing the threats to our business associated with home copying and Internet downloading.

— Organized industrial piracy may lead to decreased sales.

— Our Restructuring Plan may not be successful and may adversely affect our business.

— Our involvement in intellectual property litigation could adversely affect our business.

— We may be unable to compete successfully in the highly competitive markets in which we operate and we may suffer reduced profits as a result.

Not listed under risks: The company is reportedly buying half of Sean "P. Diddy" Combs' Bad Boy Entertainment for $30 million. That label had one hit album last year, but Warner reportedly feels Bad Boy has a lot of potential.

Me, I'm putting my money in empty jars down in the basement.