Thomas H. Lee is the star of this movie.<\/p>\n
It’s all about the nineties.\u00c2\u00a0 And the year of the apocalypse, 2000.<\/p>\n
Somehow, someway, the public lost sight of reality in the last decade of the twentieth century.\u00c2\u00a0 All investing principles went out the window.\u00c2\u00a0 It was no longer about fundamentals.\u00c2\u00a0 Profits to earnings ratios were irrelevant.\u00c2\u00a0 Rather, it was a giant came of craps, with a PATINA of legitimacy on top.<\/p>\n
Wall Street only cares about money.\u00c2\u00a0 Ask a record exec, he knows.\u00c2\u00a0 They don’t care if the record is good, just as long as it SELLS!\u00c2\u00a0 And the quarterly numbers go up, and the stock moves accordingly.<\/p>\n
Wall Street is the dealer, the house, and it wants to make its wares as ATTRACTIVE to the public\/player as possible.\u00c2\u00a0 And the way you do this is to let people make money, by creating a bull market.<\/p>\n
It became addictive.\u00c2\u00a0 To the point where those employed started to bend the rules.\u00c2\u00a0 Why not trump up the analyst reports.\u00c2\u00a0 Who’s gonna know?\u00c2\u00a0 Everything’s going up.\u00c2\u00a0 These words will be forgotten.\u00c2\u00a0 So, we’re letting our big customers in at a low price and fucking the public who can’t TOUCH the stock at offering price.\u00c2\u00a0 Isn’t this like average concertgoers being unable to buy the good seats?\u00c2\u00a0 Fuck the public, we’ve got to take care of our buddies, the institutions, who keep us going.<\/p>\n
And it all worked until one day it was evident that there was nothing there.\u00c2\u00a0 The "new economy" was built on air.\u00c2\u00a0 Many of these companies had NO income.\u00c2\u00a0 Or a pittance.\u00c2\u00a0 Dot coms went out of business.\u00c2\u00a0 But not until Time Warner and AOL merged.\u00c2\u00a0 That’s what you’ve got to give Steve Case credit for…TIMING!<\/p>\n
But then the market started to reel.<\/p>\n
And then came Napster.<\/p>\n
Richard Parsons wanted to instill order in his house.\u00c2\u00a0 Even more so, he wanted to stop the free-fall of the stock.\u00c2\u00a0 So, looking for assets to sell, he BLEW OUT the Warner Music Group.<\/p>\n
Oh, Thomas H. Lee knew Parsons was desperate.\u00c2\u00a0 One of the worst poker players of all time, Parsons let EVERYBODY know he wanted to get rid of the music group.\u00c2\u00a0 It was as if he was driving it around with a for sale sign in the back window.\u00c2\u00a0 Featuring an ever-decreasing price.\u00c2\u00a0 Shit, he’d seen the Internet movie.\u00c2\u00a0 The music group could soon be worth NOTHING!\u00c2\u00a0 It had to go, before the market crashed completely.<\/p>\n
I guess Richard Parsons belongs in the same camp as Andy Lack.\u00c2\u00a0 Someone COMPLETELY ignorant of the business they’re operating in.<\/p>\n
Unlike the dot coms, Warner Music Group had MILLIONS of assets.\u00c2\u00a0 Songs and recordings.\u00c2\u00a0 You call these COPYRIGHTS!\u00c2\u00a0 Protected by the LAW!\u00c2\u00a0 ALREADY throwing off cash, but able to generate income for DECADES to come.\u00c2\u00a0 Hell, wasn’t Congress constantly extending the TERM of copyright?<\/p>\n
Why Mr. Parsons believed music copyrights would be worthless in the future flummoxes me.\u00c2\u00a0 After all, aren’t the other assets of Warner Brothers, FILMS, copyrights too?\u00c2\u00a0 And the TV shows?\u00c2\u00a0 And the written words?<\/p>\n
But a short-sighted Mr. Parsons couldn’t see that far ahead.\u00c2\u00a0 He couldn’t see that Napster was a way station.\u00c2\u00a0 That IT could be monetized, but certainly music would be worth something in the future.\u00c2\u00a0 So he let the music group go.\u00c2\u00a0 AT A FIRE SALE PRICE!<\/p>\n
And who purchased it?\u00c2\u00a0 CARPETBAGGERS!<\/p>\n
God, give Thomas H. Lee credit.\u00c2\u00a0 They know when an asset is undervalued.\u00c2\u00a0 But their TRUE skill is in gussying something up for Wall Street.\u00c2\u00a0 Yup, they bought Warner and then took it PUBLIC!\u00c2\u00a0 They got all their money out, loaded the enterprise up with debt, and then continued to ride the horse, waiting for someone to buy it in the future, like NOW!<\/p>\n
Going back to the beginning, Wall Street isn’t about music, it’s about MONEY!\u00c2\u00a0 And Thomas H. Lee, despite being located in Boston, is part of the Wall Street club.\u00c2\u00a0 What they did was buy a used car, a used MERCEDES, and then shined up the exterior in order to lay it off on a rube, THE PUBLIC!<\/p>\n
Oh, they polished up Warner.\u00c2\u00a0 The exterior, the FINANCIALS, looked GREAT!\u00c2\u00a0 That’s what accounting rules will do for you.\u00c2\u00a0 What was going on inside?\u00c2\u00a0 God, as long as it’s GOT a motor, who can tell?<\/p>\n
Warner is in the music business.\u00c2\u00a0 They’ve got two label groups.\u00c2\u00a0 Music publishing.\u00c2\u00a0 It all LOOKS good.\u00c2\u00a0 Just on the inside it’s ridden with cancer.\u00c2\u00a0 There’s an ever-decreasing number of infighting employees functioning in an old-fashioned way in a newfangled sphere.\u00c2\u00a0 New music is a quagmire.\u00c2\u00a0 It costs too much to sign and market.\u00c2\u00a0 And there are too few places to expose it.\u00c2\u00a0 You need a COMPLETE redesign.\u00c2\u00a0 But, if you can forestall that long enough, if the car will just run until someone BUYS it, you ESCAPE!\u00c2\u00a0 With mucho dinero in your pocket.<\/p>\n
Thomas H. Lee knew Warner had to merge with EMI.\u00c2\u00a0 And, it also knew those RUNNING EMI saw themselves as music people.\u00c2\u00a0 They WANTED their jobs.\u00c2\u00a0 Whereas Thomas H. Lee invested in many industries, they’d just as soon move on.\u00c2\u00a0 So, like an ace poker player, they’ve been playing their hand.\u00c2\u00a0 THAT’S why they rebuffed EMI’s offer.\u00c2\u00a0 They don’t want to appear desperate, like Richard Parsons.\u00c2\u00a0 The key is to make EMI feel desperate.\u00c2\u00a0 Like their business is going down the tubes.\u00c2\u00a0 So EMI will pay a PREMIUM!<\/p>\n
Really, it’s like buying a used car.\u00c2\u00a0 And Thomas H. Lee owns the lot.\u00c2\u00a0 Thomas H. Lee controls the game.\u00c2\u00a0 All EMI knows IT NEEDS A CAR!\u00c2\u00a0 And there’s only ONE LEFT!<\/p>\n
Edgar Bronfman, Jr. was just a pawn in Thomas H. Lee’s game.\u00c2\u00a0 Lyor Cohen?\u00c2\u00a0 His efforts were irrelevant.\u00c2\u00a0 As long as the company financials were jiggered to look good, Thomas H. Lee didn’t care WHAT was happening at the company.\u00c2\u00a0 Knowing that the REAL assets were the publishing and recording catalogs.\u00c2\u00a0 And that these were VERY desirable.\u00c2\u00a0 It was just a matter of waiting for the right customer.\u00c2\u00a0 And they had one in mind from the moment they purchased the operation.<\/p>\n
What did Woodstein say?\u00c2\u00a0 Follow the money?\u00c2\u00a0 THAT’S how you analyze the history of the Warner Music Group.\u00c2\u00a0 It’s only unsophisticated players like those at "Hits" who are caught up in the personalities.\u00c2\u00a0 It’s about cold, hard cash.\u00c2\u00a0 And you must never get emotional about it.<\/p>\n
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