Do you know the best part of having integrity? You don't have to back-peddle when your hidden agenda is exposed.
While just about every tech-groupie blogger who predicted the demise of the major labels hides in an intellectual corner until they can find some other zeitgeist to glam onto, yours truly gets to kick back with a scotch in the “I told you so lounge." You know that place; it's the one with all the smart people, who act on common sense and get richer by ignoring the guy preaching about the end of the world. If you're my reader (which if you're reading this, you are) then you're sitting in that lounge with me. Pull up a chair, I'm gonna reward you with a tip to make some cash with your new-found confidence.
I often say, “half of being smart is knowing what you're dumb at." I didn't write it, but whoever did was pretty smart. I've used that philosophy in many ways to my advantage and investing is one of them. I'm not on the short list of people who receive the memos with inside information about what stock is about to tank or split, but I know who those people are. (So do you, if you read the news.) And we can follow what they do. Do they make mistakes and is it wise to follow them—all the time? I say, “yes" to both questions. They do make mistakes, but it's not very often and when they are right you stand to make a fortune. That warrants the risk.
What does this have to do with music?
Simple. Since the last quarter of 2010 over 50 companies have invested in the music business. You won't hear Techdirt or their elk report this, because the music biz haters refer to this new infusion as the “digital download bubble," rather than the expanding and growing music space; implying that these investors are like Lemmings walking towards the cliff. We'll see.
So between Warner and EMI on the block you're about to see several billion more dollars be injected into our supposedly diminishing industry. Are all these investors foolish? Do not one of them know how to read a blog? Sure they do, but they know how to differentiate between angry musings of haters, from actual facts.
Case in point, an opportunity for anyone to make money with music in the next few months is upon us. We are in a perfect storm of sorts. EMI, owner of the Beatles catalog, is about to fold. Their assets will be parsed and sold to... whom? We don't yet know. And in the other corner of our small universe we have Warner. Brave Warner who after being kicked to the curb by their parent company, AOL, raised their own money (from more “dumb" people) and rather than be chopped up (as the fate awaiting EMI) they said, nope, we're too big to fail, we'll be the world's first Indie/major.
It worked for a while, until they realized that you can not pay your CEO, CFO, COO and President 200X what you're paying your middle-management and maintain financial stability. Eventually you squeeze too much juice from the lemon and the lemon dries up.
What do you do then? Refinance and start selling off shit you do not need.
Whoever ends up buying these EMI/Warner assets will know two things:
1) You do not need to pay a 50 year old with three kids in private school $3 million a year to run a damn record label. There is a 35 year old with no kids who will do it for $300K.
2) The catalogs, although a diminishing asset, are still worth three times what they are paying for it over the ten so years they plan to own it.
HOW CAN YOU PROFIT FROM THIS
EMI is not public, so you can not get involved, but, at about $6 a share just about anyone can afford to buy a few shares of Warner stock. Trends show that when a company is in the news— even if it's bad news— the stock goes up. Trends show that mergers tend to raise the price of stock. Add to all that the amazing value that is the Warner/EMI catalog and you get a serious perfect—storm-favorite in this horse race.
I'm getting in this race while it's still cheap. If you do too, I'll see you at the finish line and we can go hang in the “I told you so" lounge, a fat cigar and laugh while we read Techdirt out loud.
Mo out.
