I.B. BAD: SURVIVAL OF THE FITTEST

Warner Music’s hiring of law firm Brownstein Hyatt Farber Schreck (which contested the since-aborted merger of AT&T and T-Mobile for Dish Network) to lobby against UMG-EMI may well be the first known case of a major music group formally opposing the merger of two other majors. While Sony would obviously like to see the deal struck down as well, it can’t be seen to actively oppose the combining of the two record companies without possibly upsetting its own applecart with Sony/ATV’s acquisition of EMI Music Publishing, which must also get regulatory approval before being finalized.

The proposed merger is also being condemned by U.K. indie-label org AIM and Beggars chief Martin Mills, who hope to get the attention of Britain’s Competition Commission. That said, if the EU approves the deal, it’s highly unlikely that the Competition Commission would rule differently, though it will probably require specific remedies to deal with the combined companies’ massive U.K. marketshare.

On a related subject, UMG executives and staffers are asking who’s circulating those persistent rumors about Tom Whalley getting the top job at Capitol Records. When word spread around Universal about Whalley’s purported status as label head in waiting, the most often-heard reaction was “rubbish.” Others pointed out that such a move on Universal’s part would be premature, in that UMG is prohibited from making changes within EMI until the deal gets regulatory approval.

How interesting, then, that EMI U.K. promotion chief Manish Arora, who has delivered massively for the company, has been hired for the same post by Joe Munns, the head of Universal label Polydor (and the son of onetime EMI Vice Chairman David Munns). Additionally, the word around Music Row is that UMG is already close to finalizing a deal with super-hot EMI Nashville topper Mike Dungan. One interested observer notes how little we’re hearing about Dungan relative to all the noise around the Whalley brouhaha.

The Lyor Cohen story is getting more fascinating by the day, with insiders saying his relationship with Stephen Cooper is like oil and vodka, as Cohen might put it. The unsettled nature of the relationship (or lack thereof) between these two is understandable given their fundamental differences. Cooper is a cold, calculating turnaround specialist who is accustomed to firing people, cutting overhead and selling off assets, while Cohen is an intuitive, frequently impetuous music-business lifer. Like him or not—and Cohen is a controversial presence indeed—he’s had a remarkable run spanning more than a decade, running up a string of hit records and making tens of millions of dollars for himself in the process.

Balance their all but antithetical characters with Cohen’s prior close relationship with Len Blavatnik, whom he helped convince to buy Warner in the first place, and who subsequently brought in Cooper to oversee his $3.3 billion investment, and you have a conundrum, to say the least. Little wonder that Warner Music’s creative rainmakers, all of them hired or empowered by Cohen, are nervous as their deals come up for renewal.

If Cohen can’t come to equitable terms with Cooper, what will the CEO do? Some actually believe Cooper will see a possible solution in Roger Faxon, who did, after all, deliver a good result for Citi, but the WMG natives won’t like that much, from what they’re currently spinning.

Others insist that Cooper’s only viable answer is a game-changing type of distribution deal with either Sony or Universal. That would result in the burning of millions of dollars in overhead through wholesale firings—as much as 30% of the workforce, according to some speculators—after which Warner profits would conceivably skyrocket as the company becomes simply a content owner, outsourcing sales, marketing and promotion services to its distribution partners. What Cooper may not be able to wrap his scorched-earth mentality around is that Cohen has the knowledge and experience to play a central role in transforming the company.

Disney Music chief Bob Cavallo, who will retire at the end of the month, took a perennially struggling company and built it into a huge profit center, which hit a remarkable 5% in marketshare at one point. This feat capped a wildly successful career as a manager and film producer for Cavallo, who departs of his own volition and on his own terms, making him one of the few ranking music executives to bow out so gracefully...

Names in the rumor mill: Mike Caren, Dan McCarroll, Aaron Bay-Schuck, Joel Katz, Sylvia Rhone and David Joseph.