Linkin & Warner Trade Words

The quiet period leading up to Warner Music Group’s public stock offer got disrupted by a Linkin Park press release May 2nd, when the band and its management, The Firm, said they’d just about had it with WMG’s “corporate raiders.”

WMG is about to launch a $750 million Initial Public Offering and is currently in the required “quiet period,” so there is little comment from the company. Linkin Park, though, had a lot to say and was frustrated because of the $1.4 billion the IPO would supposedly reap for WMG, only $7 million would be set aside for WMG operations.

“Linkin Park has become increasingly concerned that WMG’s diminished resources will leave it unable to compete in today’s global music marketplace, resulting in a failure to live up to WMG’s fiduciary responsibility to market and promote Linkin Park,” the band stated.

LP is contracted for four more albums but nixed plans to work on its next recording, due next spring, and wants out of its agreement. The band claims it is responsible for 10 percent of WMG’s global record sales, with 35 million units moved. As an aside, LP pointed out that EMI had to announce a change in financial projections because of delayed releases by Coldplay and Gorillaz.

“The loss of future Linkin Park recordings will be disastrous for WMG,” the band said, threatening to release its material on the Internet.

Certainly, the IPO would be less enticing if sales dropped 10 percent because of Linkin Park’s migration. But WMG fired back, saying the band and The Firm were pulling those numbers out of the clear blue sky.

The 10 percent was more like 3 percent, according to one unnamed source. And if WMG is hurting, one wouldn’t tell from Nielsen SoundScan which, at press time, had three WMG releases in the Top 10. Overseas there were four, with Rob Thomas and Michael Bublé in the top spots.

And on the record, WMG said the band and The Firm were making inflammatory threats “in what is clearly a negotiating tactic.”

According to a source close to the band, the wheels fell off when WMG would not guarantee a figure for marketing the next album. Plus, LP was offered a $3 million advance per album for five albums, which the band saw as paltry.

On the other side of the fence, a source familiar with Warner’s negotiations said the band wanted an unrealistic $60 million advance and a 50-50 profit split. And, according to corporate insiders who talked to Newsday, the $60 mil was backed by exploiting the company’s vulnerability as it prepared for the IPO.

Edgar Bronfman Jr. and other investors purchased the recording company from Time Warner and are preparing for what they believe will be a growth period. Among those who stand to profit from the IPO is investment company Thomas H. Lee, which is also an investor in The Firm.

WMG has trimmed staff, closed offices and quadrupled employees’ health insurance premiums in the months leading up to the IPO.