The Edgar Bronfman Jr. salvation tour hit town this week, as

Warner Music

(WMG) - Get Report

arrived with an aging hipster and a thud.

Led Zeppelin guitarist Jimmy Page cranked out

Whole Lotta Love

at the

New York Stock Exchange

on Wednesday, helping to ring in trading in the record label. But there was less love on Wall Street, where Warner fetched $550 million in its Tuesday evening pricing at $17 a share -- after underwriters spent months planning to get $22 to $24 for the stock. On Friday the stock was still suffering, trading down a dime at $16.

The mixed reception wasn't entirely surprising, considering Bronfman's track record as a media executive and the wicked competition in the music industry. The latter concern was only underlined this week by the entry of Net juggernaut

Yahoo!

(YHOO)

into the online music business.

All that said, there are those who believe a Warner Music investment could make sense, particularly given that a potential merger with EMI -- the only other publicly traded music label (albeit in London) -- may be the best way for both to compete in a shrinking, competition-riddled industry. Deal talk has been swirling around EMI in particular for months, and to some minds Warner seems like the most sensible match.

"It's a good price if you believe there's upside to new media or a merger with EMI," says one media analyst. For the moment, investors will have to take a leap of faith that those new media opportunities will pay dividends.

That bet became more precarious when Yahoo! said this week that it will offer consumers 1 million songs for $4.99 per month. The development must have come as puzzling news to Warner Music on what was supposed to be its happy IPO day. Online music still only makes up a very small fraction, around 3%, of industrywide sales. But if the low price of entry that Yahoo! is offering solves some file-sharing issues, it might even be a good thing for an industry that has been plagued by piracy.

TST Recommends

Meanwhile, a merger between EMI and Warner Music Group would create an oligopoly and help them exert some pressure on Yahoo!,

Apple

(AAPL) - Get Report

and others. Any deal will be met with regulatory scrutiny, because it would shrink the music industry to three companies from four. Still, Warner Music and EMI together could parlay their combined catalogues into higher revenue and permit further cost-cutting.

Warner Music's $30 million investment in P. Diddy's Bad Boy Records last month is encouraging in terms of controlling talent and added leverage.

The Warner Music IPO comes a year after Bronfman, Thomas Lee Partners and Bain Capital bought the music division from

Time Warner

(TWX)

for $2.6 billion.

The Bronfman group has cut costs by $250 million to $300 million, which is admirable. And Bronfman, who previously staked his name on a long bet on French water utility-

cum-

media failure

Vivendi

(V) - Get Report

, has made his excitement about the new age clear. He is trying to convince investors about a bright future for the music industry. His lofty expectations about digital and wireless prospects could prove justified if a firm model emerges upon which the industry can capitalize.

Less convincing is that Bronfman and company will skim $125 million of cream off the top of the IPO by selling a piece of their action. And in a business with very slim margins, it would be nice if these guys took the bus once and a while instead of flying around in choppers.