LESSON FOR LABELS IN FRONT LINE STAKE SALE

Warner Music Group’s decision last week to sell its stake in Front Line Management to Ticketmaster is raising new questions about the future of record labels buying stakes in artist-management firms.

Since 2004, Warner and its private-equity backers, Thomas H. Lee Partners and Bain Capital, have been among the most aggressive investors in music-management firms, as WMG sought to diversify its sources of revenue.

T.H. Lee and Bain reportedly had a brief $10 million investment in The Firm, an artist-management company headed by Jeff Kwatinetz.

WMG, meanwhile, had a stake in Front Line, the music business’ most powerful artist-representation shop, with clients like the Eagles and AC/DC.

Rumors were rampant 18 months ago that Warner would acquire full control of Front Line, and as recently as six months ago Warner boss Edgar Bronfman Jr. was praising the investment on an earnings call.

A WMG spokesman said the company’s decision to sell its Front Line stake reflects not so much a shift away from the artist-management business but instead a focus on “investments where we can consolidate financial results and see a clear path to full ownership.”

Sources familiar with the matter said that WMG’s investment in Front Line did not meet those criteria, and given the economic environment and a motivated buyer in Ticketmaster, Warner opted for the cash.

According to Securities and Exchange Commission filings, WMG was able to turn a profit, flipping its $118 million investment in Front Line for a combined $141 million between the $123 million deal with Ticketmaster and the sale of a small piece of its stake to MSG in June.

WMG execs declined to comment on the terms of the deal.

Meanwhile, WMG continues to own or hold controlling stakes in several artist-management shops globally, as do other labels, including Universal Music Group, which inherited the management arm of the UK’s Sanctuary Group when it bought the company last year.