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Business

NO RECORD SALARIES

By
Brian Garrity and
Peter Lauria
Published Aug. 17, 2008, 7:30 a.m. ET

Music industry executives have lost more than just the power to generate million-album sellers and higher CD sales – gone too are the hefty salaries the free-spending music business used to lavish on their leaders.

For example, Elio Leoni-Sceti, the chief executive of EMI Music, is said to be paid less than $1 million a year plus incentives – which pales in comparison to the $18 million Doug Morris, the CEO of Universal Music Group earned in 2005.

True, Morris has been with UMG for a long time and Universal is twice the size of EMI here in the US, but the difference in pay is still startling. The same is true for executives in all levels of the music business.

“The era of the standard promo guy making $350,000-$700,000 a year is over,” said one source familiar with the situation. “There’s not a lot of million-plus players on the label level outside of the label heads.”

A huge part of the problem is the continuing declining sales of CDs. Last year, CD sales dropped 10 percent, to $17.6 billion. Some expect sales to drop again in 2008, by as much as 15 percent.

Robert Morgado, the former head of Warner Music, collected $60 million in severance pay after he was fired from the company in the mid 1990s. Current Warner CEO, Edgar Bronfman Jr., has a base pay of $1 million – although he can pocket a bonus of up to $6 million a year. He collected $3.4 million in total compensation in 2007, according to a regulatory filing – small compared to Morgadio’s take.

The topic of music industry pay stepped into the spotlight last week when one Wall Street analyst took Warner’s recorded music boss Lyor Cohen to task after Cohen sold a quarter of his shares in the struggling company for a whopping $6.8 million.

Critics charge that kind of money is symbolic of the business’ excesses and a pay scale that is out of whack with its declining fortunes.

In contrast to other media executives, CBS boss Les Moonves collected $33.7 million last year, while Comcast chief Brian Roberts made $38.9 million and Disney CEO Robert Iger made $20.71 million, according to Forbes latest roundup of CEO pay.

Multiple sources said that labels have cut back on long-term contracts with guaranteed money. New deals tend to be more performance-driven and are often limited to 2-to-3 years in length.

Private-equity players investing in music are also demanding belt-tightening. Pali Capital analyst Richard Greenfield – a noted critic of the salaries for Warner’s senior execs – pointed out last week that the company is scaling back compensation for its employees.

One source who controls the purse strings for a major record label has a different take than Greenfield on the industry’ executive compensation.

According to this source, music companies are suffering a brain drain because the plunge in their financial fortunes are preventing them from competing aggressively for top talent.

“Record companies can’t keep their top people anymore,” this source said.