Warner Music Struggles to Restore Its Luster

Once a respected titan in the music industry, Warner Music is now the third largest of the four majors, and rumors have long circulated that it may merge with the smallest, EMI. But a number of recent steps in the digital domain may yet vindicate Warner Music's new management.

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ROBERT SIEGEL, host:

Secretary of State Condoleezza Rice is another part of Asia, central Asia. She's getting assurances that the US will have access to military bases in that region. The issue has been a sensitive one ever since Uzbekistan ordered US troops out of a base that's been used in operations in Afghanistan. NPR's Michele Kelemen is traveling with the secretary.

MICHELE KELEMEN reporting:

Secretary of State Rice started her tour of central Asia at the Manas Air Base in Kyrgyzstan. It's been an important logistical base for the US-led war in Afghanistan, and Rice wanted to make sure the US continues to have access to it. She won a pledge from Kyrgyzstan's new president, Kurmanbek Bakiyev, that the US can stay as long as military operations in Afghanistan continue. Speaking through an interpreter, Bakiyev said Kyrgyzstan and the US would decide the future of the base together.

President KURMANBEK BAKIYEV (Kyrgyzstan): (Through Translator) That is the term of presence is directly tailored to the improvement of the situation in Afghanistan.

KELEMEN: Kyrgyzstan has been under pressure from others in the neighborhood, including China and Russia, to give the US a timetable to leave. The US officials say they were pleased to get Kyrgyzstan's commitment in writing. In return, US officials say they will review how the payments are made. Some here have alleged that much of the money went to the son of Kyrgyzstan's ousted president, Askar Akayev. The ouster of Akayev six months ago, the so-called Tulip Revolution, was also a key topic during the secretary's one-day stay. Secretary Rice reached out to democracy activists and members of a constitutional reform council, even trying out a bit of her Russian.

Secretary CONDOLEEZZA RICE (State Department): (Russian spoken)

KELEMEN: Apologizing that her Russian was rusty, she switched to English to make her case for democratic change in the former Soviet republic. She hailed the recent presidential vote as the most free and fair elections in the region's history.

Sec. RICE: I came here to Kyrgyzstan so that you might know that you will have a steady friend in the United States who believes, too, in democratic values and that as those democratic values take root here in Kyrgyzstan, relations between the United States and Kyrgyzstan will only grow.

KELEMEN: Even among the handpicked crowd listening to Rice, many had their doubts about where the country's democratic revolution is heading. Some described it as a mere coup. And Balat Bakijoyev(ph), a businessman and member of the constitutional council, said he's having trouble seeing much of a difference in leadership styles between the ousted leader and the newly elected Bakiyev.

Mr. BALAT BAKIJOYEV (Constitutional Council Member): (Foreign language spoken)

KELEMEN: `Today I don't see any big difference,' he says, `though I hoped there would be.' An earnest young democratic activist, Edil Baisalov, though, said he's not ready to give up on the Tulip Revolution or the new president. Baisalov heads the Coalition for Democracy and Civil Society and was pleased to hear Secretary Rice push for constitutional reforms that would weaken the presidency.

Mr. EDIL BAISALOV (Coalition for Democracy and Civil Society): We know that power corrupts, right? And we have this absolute power here that can corrupt anybody. But we need to build such a system where there is not one person who, you know, wields the democracy. Democracy takes people.

KELEMEN: Kyrgyzstan, he says, is in a difficult neighborhood and needs US support. Rice plans to push her democracy agenda in other former Soviet republics, in Tajikistan and Kazakhstan, but first she plans to visit Afghanistan and possibly Pakistan in the wake of last weekend's devastating earthquake. Michele Kelemen, NPR News, Bishkek, Kyrgyzstan. ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris with the story of a major record label as it faces a fast-changing music business. After being absorbed by a giant media conglomerate and spun off again, Warner Bros. is now the third-largest record label. And as NPR's Neda Ulaby reports, it's looking at the digital domain as a key to its future.

NEDA ULABY reporting:

A band called The Sun has just released its debut album entirely on DVD.

(Soundbite of music)

ULABY: "Blame It on the Youth" is comprised of 14 music videos. You can't buy it on CD. Warner Music expects you to play it on your computer.

(Soundbite of song)

THE SUN: (Singing) I stopped to think about the bad times that I've had. But the smile on my face ...(unintelligible).

ULABY: The band was signed three years ago. The musicians became frustrated by how long it was taking for their album to come out, so they amused themselves by making videos with a friend in their hometown of Columbus, Ohio. Warner was impressed by how many they produced on a small budget, so the band proposed making one for each song.

Mr. SAM BROWN (The Sun): And they decided that they thought it was a good idea and they found more money for us to finish up the videos so we could get them done in time for this fall release.

ULABY: Sam Brown is The Sun's drummer. He also writes some of the band's songs.

Mr. BROWN: Being on a major label you have access to, you know, a little bit more money than you would if you were just making videos on your own. So it definitely made it possible for us to, you know, make 14 videos.

ULABY: Brown says those 14 videos cost about $50,000. That's a fraction of what it might take to make one video for a star. The Sun's DVD was a cheap experiment for Warner Music at a time when the company is trying to reinvent itself. The label began in the late 1950s as a way for a major Hollywood studio to showcase the musical aspirations of stars like Tab Hunter.

(Soundbite of song)

Mr. TAB HUNTER: (Singing) Jealous heart, oh, jealous heart, stop beating.

ULABY: It took a while for Warner Bros. Records to hit its stride, but by the 1970s Warner had built a reputation as the most artist-friendly of the big labels, and its roster ranged from Frank Zappa and Jimi Hendrix to James Taylor and Fleetwood Mac.

(Soundbite of song)

FLEETWOOD MAC: (Singing) All your life you've never seen a woman taken by the wind.

ULABY: By the 1980s Warner had absorbed such well-respected labels as Atlantic, Elektra, Asylum and Sire. Its artists included R.E.M., Madonna and Prince. Warner executives Mo Ostin and Lenny Waronker were among the most powerful in the business. Then Warner Communications merged with Time Incorporated in 1989, which merged again about a decade later with AOL. A wave of consolidation overtook the music industry. After the dust settled, two labels, Universal and Sony BMG, controlled the majority of domestic music sales. So last year AOL Time Warner spun off its once vaunted music division.

Mr. ARAM SINNREICH (Radar Research): They were basically dead weight inside of the Time Warner corporate edifice.

ULABY: Aram Sinnreich co-founded Radar Research, a firm that analyzes media and technology. He says Warner's new owners, a group of investors led by Seagram's heir Edgar Bronfman Jr., faced a challenge.

Mr. SINNREICH: He's a young guy with new ideas and a big ego and wants to run a record label, and that's part of what motivated him, but actually does care about music as a product, even though he comes from a liquor background, gets together his friends and buys the label off of this fat-cat corporate entity. They slice costs. They fire a bunch of people. They fire a bunch of artists, terminate their contract, cut it down to like just bare nothing, start to stabilize the blood flow. And then they announce all these digital initiatives and are really trying to kind of reinvent what a record label is. I mean, that's the arc of the music industry right there in that story.

ULABY: Warner Music made a public stock offering last spring and paid off its investors. This upset some of the label's artists. The band Linkin Park accused the company of putting money before music.

Mr. BISHOP CHEEN (Analyst, Wachovia): That's to be expected.

ULABY: Bishop Cheen is an analyst with Wachovia.

Mr. CHEEN: Name an industry where there's not a lot of friction, where there's a lot of dollars.

ULABY: And Warner Music is spending them in the digital domain. The company has announced a deal with MTV to put videos on cell phones. It's launched a wireless streaming music subscription service, and it recently named a top executive to handle digital legal affairs. Those are the choppy waters of copyright and proprietary technology that have caused the music industry to founder online. Warner Music also lured a legendary record executive out of retirement who bluntly questions the industry's approach to matters such as file sharing.

Mr. JAC HOLZMAN (Cordless Music): I understand that you don't want people stealing your music, but at the same time I think we could have recognized that the Internet was an important force and used it ethically and to great effect.

ULABY: Jac Holzman founded Elektra Records in 1950 as an independent folk music label. He went on to launch the careers of Judy Collins and The Doors. Now at 74 years of age, he's launching a new online only e-label for Warner Music.

Mr. HOLZMAN: When I started to design the e-label, I tried to block out all of my past experience. But there were certain lessons from the past that became very clear to me: the frequency of interaction between an artist and their fan base by continual release of records, keeping the costs low, having a methodology of releasing that would let us use our medium to introduce our material to people.

(Soundbite of music)

ULABY: Cordless Records won't feature big names from the Warner catalog.

(Soundbite of song)

JIHAD JERRY AND THE EVILDOERS: (Singing) You're 35, two kids, (unintelligible) but I don't care.

ULABY: Jihad Jerry and The Evildoers is fronted by a founding member of the band Devo. Cordless will concentrate on newer artists, releasing their music in what Holzman calls clusters of three songs. And when it comes to certain industry norms long despised by musicians, Holzman promises change.

Mr. HOLZMAN: The fundamentals of the Cordless agreement is that the total contract length if we exercise all of our options and if the clusters are delivered on time is 21 months. The artists own their masters and if they publish with Warner/Chappell, they own their copyrights.

ULABY: Another convention Cordless may challenge is the industry's wisdom on hits. Analyst Bishop Cheen.

Mr. CHEEN: This is a business where you can leverage an entire label off of one hit.

ULABY: But that's been less true so far with online music. Jac Holzman says he's not even thinking about hits.

Mr. HOLZMAN: There is no hit model. There's only good music, and if it catches on, maybe it becomes a hit. But I don't know what a hit is for an e-label. I don't know what those metrics mean yet. We will find out over time.

ULABY: Warner Music's CEO, Edgar Bronfman Jr., told a recent conference the industry's paradigms are changing. Digital revenues now account for 6 percent of his company's business. And in the wake of several fights with artists over royalties, Bronfman hinted support for a new open standard for managing digital rights, one that foregoes royalties altogether. Neda Ulaby, NPR News.

SIEGEL: You're listening to ALL THINGS CONSIDERED from NPR News.

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