[MUSIC] But back to all the original ground-shaking and consolidations in the recording industry. Warner Brothers Pictures entered the music recording business for the first time, only briefly, back in 1930s when Warners' lucrative music publishing division purchased Brunswick Records, which already had top artists such as Duke Ellington and Al Jolson recording for them. After the acquisition by Warner, the label signed other top acts like Bing Crosby and Mills Brothers and was poised for a great new chapter on the Warner. But the one-two punch of Great Depression and radio broadcasting put a whole record industry into recession and Warner eventually sold Brunswick to Decca after releasing it to America Records Corporation for a few years. More than 25 years later, in 1958, Warner enters the recording industry again, by forming Warner Brothers records and expands quickly by purchasing Frank Sinatra's Reprise Records, as well as Valiant and other records. Seven Arts, a film production company, then acquires Warner Brothers film and record business and forms Warner Seven Arts. Warner Seven Arts then acquires Atlantic and Elektra record companies and adds it to the growing list of its labels. The Kinney Corporation, a national business conglomerate, at that point buys Warner Seven Arts and renames it Warner Communications. Warner Communications' music distribution division came to be known as WEA Distribution, as it still is today, for Warner Elektra Atlantic Labels that were its anchors. In the late 1980s, Warner merges with Time Inc., a publishing conglomerate and becomes TimesWarner. Ten years later TimesWarner merges with AOL, an internet company and becomes AOL TimesWarner, in a deal valued at $350 billion. Yes, that's a billion with a b. Amazing. Warner Music Division becomes Warner Music Group, or WMG, the name it still holds today. Few years later, as the .com bubble bursts, AOL is out, and AOL Time Warner reverse back to just Time Warner again. A few years later, in 2004 TimeWarner sells Warner Music Group to a group of private investment firms. And a year later, it becomes the first publicly traded stand-alone music content company on the stock market. In 2011, Warner Music Group was bought by Access Industries, a private industrial conglomerate that owns it today and ceases to be publicly traded. And that's how Warner Music Group became the Warner Music Group we know today. Your head spinning yet? Hold on, because to paraphrase Robert Frost, we have miles to go before we sleep. Back to the sixties again. Music Corporation of America or MCA a legendary booking agency dating back to the 1920s that in the 1950s expanded into television and film business. Now, in the 1960s requires American DECCA at this time major record label as we mentioned before. But this requires a little rewinding and a bit of fast forwarding to appreciate as it will have a major impact on the industry to this very day. Now it gets really thick here, just as thick is that Warner Brother's ownership maze we just spoke about, if not even thicker, so hold on. Formed as a music booking agency in Chicago in 1924, MCA moves to Hollywood in the late 1930s and quickly becomes the largest entertainment talent agency in the world, with a client list that includes movie, Broadway, radio and recording stars, as well as the most prominent Hollywood producers and directors. Ronald Regan was one of those MCA movie star clients whose career was steered by Lew Wasserman, the legendary head of MCA and an entertainment business powerhouse himself. Wasserman guided Regan not only through the movies world to the top of it's pyramid, helping Reagan become the president of the Screen Actors Guild in the 1940s, but also to the top of the political world, helping him become the Governor of California in the 60s and the President of the United States in 1980. Do you think MCA had some clout and pull when different music, film, and television business regulations were being made by the government and the unions at the time? Just a thought. Having Reagan heading the Screen Actors Guild certainly proved to be beneficial to MCA. When they needed a waiver by the Guild to allow, then to start producing TV shows, which is a talent agency they were forbidden by the Guild to do, Reagan provided a waiver, and MCA in a few years became the top supplier of TV shows to all the networks, a business eventually worth hundreds of millions of dollars. And that's just the pull at the union level. You can use your imagination about Wasserman's clout in the industry as his client and friend became the governor and then the president of the United States. But we digress. Back to the consolidations in the recording industry again. In 1962, the MCA Corporation decides to reinforce the stake in it's first love, the music business, and acquires American Decca, a major record label that at the time also happened to own Universal Pictures. Now MCA already owned Universal Studio, a movie production facility that it bought from Universal Pictures and which at least backed Universal Pictures for $2 million a year, while giving Universal Pictures access to MCA movie stars. So Universal Pictures was already under heavy MCA influence, just not under its official ownership. I know, can it get any more complicated? But it's true, so go figure. So in order to now officially own, not only a record label, but a movie company as well, MCA was forced by the Justice Department to divest of its talent-booking business. Since owning a talent agency and a movie company violated anti-trust laws. Do you think Wasserman was a bit miffed with Robert Kennedy, who was the Attorney General at the time? And that maybe being forced by the Kennedy's Justice Department to part with a multimillion dollar business had something to do with Wasserman eventually backing and pushing Reagan, though Wasserman himself was a known Democrat and a Democratic fund raiser, hm. But we digress again. Anyway, since he couldn't keep both sides of the equation before divesting of the booking business, Wasserman made sure that as many of the MCA clients as possible got booked and signed to Universal Pictures, thus continuing the MCA's business relationship with them, this time from the other side of the industry as a movie company. On the music business front, the MCA corporation, now the owner of Decca Label and its music catalog, eventually replaces Decca name with MCA Records and starts aquiring other record companies. Most noticeably, ABC Records and all of it's subsidiary labels in the late 1970s. By this time, the MCA corporation is growing at 47% annually. It's TV and films operations brought in a combined revenue of $364 million in 1975. And MCA Records reported $127 million that year. MCA Records continues to expand by acquiring Chess, Motown, GRP and Geffen labels in the following decade which is when MCA Records was renamed to MCA Music Entertainment Group. In 1990, Wasserman sold the MCA Corporation, including it's music business, to Japanese electronic company Matsushita. Which in turn, five years later, sold it to Seagram Canadian beverage company. I told you it gets stickier, so just stay with me. Seagram, a year later, acquiring MCA, drops the name MCA in favor of the MCA's film company, Universal, and the MCA Corporation becomes the Universal Studios Corporation. MCA Entertainment Group was, in turn, renamed Universal Music Group, or UMG, as we know it today. And MCA Records became just one of the UMG Record labels. A few years later, Seagram acquires PolyGram Records from Philips. Which was a major record company at the time owning A&M, Island, Def Jam and other labels, and merges it with Universal Music Group. When General Electric bought Universal Studios Corporation and merged it with its National Broadcasting Corporation, NBC, right, in 2004, Universal music group became a separate entity and was acquired by French [LAUGH] media conglomerate Vivendi, which still owns it today. Most recently, Vivendi expanded UMG by buying one of the four contemporary major record labels in the industry in 2012, British EMI, for $1.9 billion, making it a part of Universal Music Group. And thus today there are only three major record companies operating in the industry, just like it was in the beginning over 100 years ago. Then, they were Edison, Victor and Columbia and today they are Warner Music Group, Universal Music Group, and Sony Music Entertainment. And since we have covered Warner's and Universal's path to here, there is just one more major for us to consider in order to complete the big picture of today's recording industry's corporate landscape, Sony Music Entertainment. Its path is not as winding and split up as the Warner's and Universal's, so no need for that headache medicine yet. Sony, a Japanese electronic giant, became involved in the recording industry by establishing a partnership with CBS, the home of the legendary Columbia Records, in 1968 and forming CBS Sony Records. The partnership was, was renamed a few times throughout the years. First into CBS Sony Inc., and then into CBS Sony Group Inc. In 1988, Sony becomes the sole owner of the record company. And a few years later, that record company became Sony Music Entertainment. After operating as such for over a decade, in 2004 Sony Music Entertainment merges with German record company, Bertelsmann Music Group, and becomes Sony BMG Music Entertainment. BMG owned Arista and RCA labels, which through this merger, became a part of Sony BMG. Nothing extraordinary, until you realize that RCA Records now came under the parent company umbrella of it's biggest historical rival, CBS Records. Since Sony owned CBS. Thus, RCA and CBS Records, the recording industry pioneers, home to legendary victorian Columbia labels, after decades of rivalry, became part of the same label family. An other unexpected, almost poetic moment in the recording industry. Well, maybe not poetic, but somehow moving nevertheless. Four years later, Sony buys BMG out, and it becomes Sony Music Entertainment we know today. And there you have it, today's big three: Warner, Universal and Sony from the ground up. And they're not sitting still. After all the vying for EMI as we mentioned earlier, Universal ended up with the big prize a couple years ago and EMI Records is now under the Universal's umbrella. As part of the deal the, the European regulators did not allow Universal to purchase EMI publishing business as well and it was acquired by Sony. The regulators also required Universal to divest of some of the EMI assets upon the purchase so Universal put EMI's Parlophone label group up for sale. Warner bought Parlophone last year for $765 million. So everyone got their piece of the EMI pie and everyone is happy now, right? Well, we'll see. Not all the pieces of that pie are the same and some may even hurt the stomach a bit, Warner's stomach in particular. Especially when they compare what they got to what Universal got. EMI's Parlophone label group, that Warner bought, does look impressive with its legendary Parlophone label Chrysalis and Ensign labels, and its EMI recorded music branches in France Belgium, Sweden, Norway, Denmark, Spain, Portugal and so forth. Its artists include heavyweights of the industry, but mostly either past heavyweights or those who that have passed their peak and are on the downward trajectory. Danger Mouse, Tina Turner, Gorillaz, Kylie Minogue, Deep Purple, Iron Maiden, Duran, Duran, Coldplay, Pink Floyd are all on that list. Now Coldplay and Pink Floyd can certainly still deliver big, but Pink Floyd got such huge advances from their current EMI contract that it will be a long time before that's recouped. So that leaves Coldplay as the leader of the pack. Coldplay did release an album this year, Ghost Stories, which was charting and selling well. So that's a good start here. But some of the other catalogs on that list sell much, much less than they used to, or hardly move at all. General consensus in the industry is that 765 million that Warner paid is way too much for Parlophone and that Warner got the raw deal here. Universal didn't expect to get much more than 500 million for it, but bidding got out of hand and Warner paid the price figuratively and literally. On the hand Universal got paid 765 million for it, which offsets greatly the price paid for EMI, which was originally 1.9 billion, and their catalog now includes the Beatles, David Bowie, Katy Perry, and Frank Sinatra, just to name a few. Only time will tell who got a better deal, but from this vantage point, Universal is sitting pretty and bit more comfortable than Warner. And how did Sony do in the whole let's get us some EMI pie thing? Well, for $2.2 billion, Sony got EMI Music Publishing, and the copyrights to its 1.3 million songs. That's 1.3 million songs. That comes to about $1,700 per song. Considering that the catalog includes songs by Jay-Z, Beyonce, the Black Eyed Peas, Kanye West, Amy Weinhouse, Nora Jones, Alicia Keyes, Pink, Riana, Usher, and others at that level, you think Sony can make it work. Sony already owned the catalog of 750,000 songs prior to this acquisition. So now they control a copyright of over two million songs worldwide. I think they'll do okay is the understatement of the century. And that's where we are nowadays when it comes to the leaders of the industry. Your head is still in one piece? That was quite a ride now, wasn't it? Who would have thought that the road from there to here can be so convoluted? But there it is, and now you know. And now you can take the headache medicine, relax, digest all this, and get ready for the next module. I'll see you then. [MUSIC]
