A Band Makes Its Case Against Record Label
05.05.2008LOS ANGELES, May 8 - In six years together, the musicians in the rap-rock band Linkin Park have written song after song about angst, rage and self-reliance. So perhaps it is not hard to imagine their shock at being asked by the Warner Music Group, their record company, to play a gig at the New York Stock Exchange to celebrate Warner's planned $750 million initial public stock offering.
The request, members of the band say, galvanized their anger at the corporation, which has cut roughly $250 million in costs as part of a reorganization before its offering, mainly with layoffs and consolidation. The group says concerns that the public offering would reward investors while shortchanging the company and its artists led the band to ask to be released from its record contract last week.
The invitation to play at the stock exchange "just exemplifies how out of touch the ownership of the Warner Music Group is with our band," said Brad Delson, the group's guitarist and primary spokesman, in his first interview since the Grammy-winning band issued its demand in a written statement that criticized the company. "It doesn't make any sense to us why we would play a show at the New York Stock Exchange. I don't know what was going through their minds."
Linkin Park, which Edgar Bronfman Jr., the chairman of Warner Music, has described as "the biggest rock band in the world," says it is researching how it might legally sever its contract with Warner, which calls for the band to deliver four more albums. The band has released two full-length albums and three additional recordings through Warner, selling an estimated 17.9 million copies in the United States alone, according to Nielsen SoundScan. But the musicians say cutbacks at Warner have hurt the company's ability to market future Linkin Park recordings.
Warner, whose roster of artists includes Green Day, matchbox twenty and Metallica, said in a statement that while it respected Linkin Park, the band's statements "are in contradiction to those of their representatives, whose demands for unreasonably large sums of money have also been accompanied by threats to disparage the company publicly." It added that, "while Warner Music regrets these unfortunate negotiating tactics," it continues to support Linkin Park's career growth.
Mr. Delson, in a telephone interview on Friday, characterized Linkin Park's stand as one of principle, not profit. The soon-to-be publicly traded company "is bad news and that's why we don't want to stick around and see what happens," Mr. Delson said. "There is no negotiation taking place," he added. "We want off the Warner Music Group."
Asked if a large advance from the company might diminish his concerns, Mr. Delson said, "unfortunately, we're past that point."
It is unclear whether the band has any workable legal strategies for exiting the company. In previous public showdowns, artists like Beck, the Dixie Chicks and Luther Vandross have sued to end their contracts only to back down in exchange for multimillion-dollar advances.
The Linkin Park dispute has boiled over at a sensitive moment for the company. Warner, the smallest of the world's four major music conglomerates, is expected to sell shares as early as this week and hopes to raise $750 million or more. The band has said this would generate a "windfall" for Warner's owners, who have earmarked only $7 million of the proceeds for the company's general operations.
Mr. Bronfman led a team of private-equity firms, including Thomas H. Lee Partners, to buy Warner Music from Time Warner last year for about $2.6 billion. The new management reorganized the company to lift profits, and along the way trimmed salaries and laid off more than 1,000 employees.
When the stock offering is complete, Warner Music's public-offering documents say, the company plans to pay Mr. Bronfman and the other owners - who have already recouped their initial cash investment - a total of about $200 million in management fees and special dividends.
"Listen, Warner Music Group obviously doesn't want anyone to focus on the fact that they've cut and they've cut," Mr. Delson said. He added that he believes the company has tried to "disparage" the band as greedy stars, even as the investors are "sucking out the cash and putting it into their own pockets."
Warner Music insiders still argue that the band's statements are window dressing for a hard-nosed negotiation devised by the Firm, the band's management company. That company's principal, Jeff Kwatinetz, had been advising the Lee firm with an eye toward buying Warner Music before Mr. Bronfman stepped in. (The Lee investment company now holds a minority stake in the Firm.)
Mr. Delson would not discuss details of the band's contract talks with Warner, and he denied any connection between his band's protest and the management company's relationships. "Warner Music Group's problem isn't with the Firm, it's with Linkin Park," he said. "These concerns are ours."
Warner Music executives countered that the band had never before raised worries about its marketing and promotion. They added that the band had not asked Warner to halt a planned solo album from the Linkin Park rapper Mike Shinoda.
Nevertheless, the feud brewed rapidly after the band's legal team sent Warner a letter a month ago in which Linkin Park appeared to express interest in receiving a cut of the proceeds of the anticipated stock offering, according to sources involved in both sides of the talks. While top executives batted around the concept of paying the band in stock - a radical departure from the industry's usual compensation - Warner ultimately decided it would be too awkward and rejected the idea, said someone on Warner's side of the table.
In response, the band's representatives said the musicians did not want a piece of the stock offering after all, but had become increasingly anxious that the company's cost reductions would prevent Warner from matching the marketing muscle it had put behind the band's previous albums. They said that the band deserved an upgraded contract, and asked for $60 million in advances and half of the profits on their new recordings.
Warner Music executives responded by offering a $15 million advance against 50 percent of the profits, and asked the band to extend its deal to five more albums instead of four.
That offer was poorly received. People involved in the talks said that the band's representatives sent another letter, this time accompanied by a draft of the biting press release they said the band would release within days. A Warner executive who request anonymity to avoid personally inflaming the dispute, described the letter as a "blackmail" tactic.
A band representative said: "It wasn't, 'Send us a check or we're going public.' It was more like, 'Address these concerns about the IPO, the future of this company.' "
Regardless, the parties then all but cut off communication, and several days later the band issued its statement. The band members said at the time that while not recording, it might rely more on touring and endorsement deals. Mr. Delson did not say how long the group would be willing to hold back from releasing new music.
"We're 100 percent committed to making sure that Linkin Park continues to be successful and we continue to have the relationship that we have with our fans," he said. "We have a voice and we intend to use it."
New York Times - May 9, 2005