Edgar Bronfman, Jr.

Edgar Bronfman, Jr.

Chairman and CEO Warner Music Group 

In a time where market fear is greater, there is an aversion to risk and less tolerance of underperformance--cash has become financial comfort food. What's needed is a comfort level of cash earnings and cash resources to enable significant financial flexibility--whether measuring earnings as EBIT, EBITA or operating income to pay down debt, create opportunity and invest in equity holders. With the help of Sarbanes-Oxley following your signature, it's made sure that every CEO is now a CFO. Working capital has become a radar screen for improved performance. Unlike more traditional businesses, the music industry is normally a high cash flow industry, requiring very little working capital. However, in recent years, because of the impact of piracy, the recorded music side of business has seen some decline. With the loss of recorded music revenue cash flow, we not only needed to take out costs across the board but build significant cash reserves to protect the more profitable music publishing side of the business. So how do we generate cash? We create cash by carefully measuring return. For example, we limit the strategic investments in artists and marketing efforts by immediate cash generation capability, not just profit potential. But most importantly, remember that we are a music company--arguably the best--but we are not a bank. Warner is driving visionary change by crafting more stringent financial arrangements and investing in financial outsourcing support to reduce our accounts receivable, collections and DSO. I believe strongly that what gets measured, gets managed ... what gets managed, gets profitable and what gets profitable, generates cash!

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