Specialty label willing to be caught

EXCLUSIVE
Warner Music Group is in advanced talks to acquire the outstanding 50% of Rhino Records, the music industry’s preeminent issuer of catalog product.

The deal, which according to sources is priced at north of $60 million, is being fashioned to give Rhino access to product from all the Warner family labels. Currently it draws just from the Atlantic Records Group, with which it inked a deal in 1992.

The success of the 20-year-old Rhino — the company is estimated to be valued at around $120 million — has spawned a number of imitators, such as Universal’s Hip-O Records, while single-handedly stoking consumer and retail interest in archival products.

Potent brand identity

Although the closely held company doesn’t break out profits, Rhino’s annual net revenues are in the $10 million-$14 million range, according to sources.

Though the deal with Warner Music Group has been working its way through the system for several months, the talks recently heated up.

But points slowing the closing of the pact, according to sources, include how profits earned by Rhino reissues will flow back to the labels from which the product was culled. Also impeding the deal’s progress were earlier shifts in management at Warner Music and among the Warner label family, which have necessitated bringing the new execs up to speed on Rhino’s history and value to the various companies.

Also being discussed is how best to compensate Rhino chiefs Harold Bronson and Richard Foos. The execs would need to be given a deal that encourages growth of the label as well as one that handsomely rewards the execs after selling the outstanding half of Rhino.

Issues still on table

Among the issues still being debated are how Rhino would work in concert with the existing sales and marketing arms of the labels, such as Warner, Reprise and Elektra. How the acquisition of Rhino will impact the existing Warner Special Products arm is also being discussed.

Sources noted that many of the duties of staffers at Warner Special Products — which presently handles licensing for the placement of music in films, the marketing of compilation albums and the creation of specialty items — would be duplicated by Rhino execs.

Insiders suggest the WSP and Rhino arms could be folded into one operation.

Rhino has proven its ability to seek out marketable products and has inked a number of deals with product sources outside of the Atlantic distribution pact. Sources said the label presently relies on Atlantic product for around 15% of its overall release schedule.

Well-known artists

Rhino has developed a huge business by releasing retrospective works from such well-known artists as Ray Charles, the Everly Brothers and Aretha Franklin, among many others, as well as creating compilation albums boasting obscure hits and novelty records.

It also has recently inked key alliances as part of its need to fill an aggressive release pipeline, such as its acquisition of Sugar Hill Records, a goldmine of blues and ’50s-era rock ‘n’ roll artists.

Rhino also recently bowed a music publishing joint venture with Bug Music and renewed a long-term, exclusive pact with Bearsville.

None of the parties involved would comment.

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