Barking Over Bulldog

Depending on who you’ve been listening to, Warner Music Group is either set for a boom or set for a bust these days.

While a Merrill Lynch analyst recently upgraded the company’s stock, which has floundered in the past year, to a "buy" rating, another analyst at Pali Research wrote a scathing blog post the same day.

Pali’s Rich Greenfield called WMG’s acquisition of Bulldog Entertainment Group – the same company that offered $15,000 "passports" to the Social @ Ross concert series in the Hamptons last summer – a waste. He said that while Bulldog was reportedly purchased by WMG for about $16 million last summer, it’s lost millions more since.

"How does selling (effectively) $3,000 concert tickets help Warner Music sell CDs and digital downloads (not a label 360 deal, as it involved artists with nothing to do with WMG)?" Greenfield wrote. "WMG needs to be slashing costs and investing in its A&R efforts, not ‘partying’ with the Hamptons crowd on the company’s bill, as if the recorded music biz was vibrant."

There’s no doubt that WMG was taking a bit of a risk in purchasing Bulldog Entertainment – slow sales at the start of the series led organizers to offer individual show tickets at $3,000 each and the promoter was rumored to be papering the house with celebrities – but the timing of Greenfield’s post has apparently raised a few eyebrows.

Greenfield told the New York Post in an e-mail that he’d recently uncovered WMG’s Bulldog purchase in SEC filings.

"A significant amount of proprietary research/time went into uncovering the Bulldog story as Warner Music senior management declined to comment," he said. "We believe this is yet another mistake made by current management that needs to be reflected in its valuation, particularly at a time when [cash flow] is falling with over five times leverage."

However, the Bulldog Entertainment acquisition wasn’t necessarily as hidden as Greenfield claimed.

Along with SEC filings dating back to August 2007 that list Bulldog as a WMG subsidiary, Fox News gossip columnist Roger Friedman also reported on the purchase at the time.

Warner Music shares were up 20 cents at end of day January 16th, closing trading at $5.33.