Warner bags Rhino

Deal took four years to orchestrate

In a move that places much of the catalog from the Atlantic, Elektra and Warner Bros. Records labels under one roof, Warner Music Group has acquired the outstanding 50% of Rhino Records, according to sources.

The deal, which closed late Monday and is expected to be announced as early as today, also gives Rhino founders Harold Bronson and Richard Foos new, lucrative five-year employment contracts with WMG and hefty signing bonuses.

The agreement, which took four years to orchestrate, bases a final sale price for Rhino on the label’s projected future revenues. The company is currently estimated to be valued at $100 million, according to industry observers.

The new deal also extends Rhino’s existing relationship with Warner Music Group by adding catalog product from artists on the Warner Bros. and Elektra Records labels into Rhino’s purview. Previously, Rhino was charged with marketing discs only from Atlantic Records’ vaults.

Some marquee artists will be excluded from Rhino’s efforts under the new deal.

Elektra will continue to market inhouse product from the Doors while Warner Bros. will maintain responsibility for Frank Sinatra and Prince product, among others. Atlantic has long held marketing duties for Led Zeppelin discs, which will continue.

According to sources, a formula has been designed to compensate the labels with profits derived from Rhino’s efforts.

All albums released under the new deal will be issued with the cooperation of Warner Bros. and Elektra execs, and where possible, the artists or their estates also will be consulted on Rhino’s reissue programs.

The timing of the deal was linked to take advantage of the red-hot industry environment for catalog product. Reissues and re-packaged discs are typically less expensive than current albums to promote and market, and offer labels a healthy upside.

The pact — which had been anticipated (Daily Variety, Jan. 26) — also offers some cost-savings to the Warner Music conglom.

Rather than each of the labels bowing expensive infrastructures needed to effectively market and promote albums from its vaults, WMG execs thought it wiser to bring in Rhino, the widely recognized leader in catalog exploitation.

Sources said Rhino co-chiefs Bronson and Foos will be handsomely rewarded if Rhino is successful in this second phase of its relationship with WMG through a formula that figures in the catalog marketer’s profits and revenues growth.

The pair could earn an eight-figure payout at the deal’s end, sources said. However, they could also renew their employment pact, get the check and stay on for several more years and further build the company. Foos and Bronson could not be reached for comment.

Though the closely held company doesn’t divulge profits, sources said Rhino logs around $12 million in annual pre-tax earnings. Rhino sold half its company to Atlantic Records in 1992 for cash and access to the repertoire of Atlantic acts in a deal valued then at $18 million, sources said.

Rhino has become the architect of catalog exploitation by releasing retrospective works from such well-known acts as Ray Charles, the Everly Brothers and Aretha Franklin, through licensing deals. More than 100 people toil at Rhino, which also has retail outlets and feature film interests, which are not included in the deal.

Its acquisitions of North American rights to the Sugar Hill and Roulette Records labels made Rhino the leader in releasing blues and ’50s era rock ‘n’ roll repertoire. Rhino currently has its sights on another marquee company acquisition.

The Rhino deal will not impact the existing Warner Special Products arm, which licenses music for use in films and TV shows, sources said. WSP and Rhino will remain stand-apart outposts, but will work together on projects where warranted.