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Business News Labels & Publishers
Lots more EMI speculation – woo!
By CMU Editorial | Published on Thursday 25 February 2010
So, with Terra Firma now having less than 95 days to come up with the $189 million that will stop EMI from defaulting on its loan commitments to Citigroup, there is increasing speculation as to what will happen if the equity firm can’t find the cash, and ownership of the music firm transfers to the US bank.
Some suggest that Citigroup’s Chairman, Richard Parsons, will play a particularly active role in deciding EMI’s future if it should fall into the bank’s possession, even though his top position at the bank is technically a non-executive one. Parsons, you see, was, until recently, the top man at Time Warner meaning he knows a thing or two about the entertainment industry.
And about selling off major record companies, he having been in charge at Time Warner when it sold its music assets to Edgar Bronfman Jr. Of course Bronfman Jr’s Warner Music is generally seen as the most obvious buyer for EMI, though no one seems sure whether Parsons and Bronfman’s previous track record in this domain makes that deal more or less likely.
While an EMI Warner merger still seems the most viable deal to be done within the existing record industry, given the combination would make the merged company a similar size to its rivals Universal Music and Sony Music, some reckon both those bigger rivals might be interested in picking up some of the London music firm if it was suddenly on the market. And, of course, there have been albeit unsubstantiated rumours that the new version of BMG might be interested in getting its hands on some of EMI’s catalogues.
But what about deals from outside the record industry? Could this be the long predicted moment that one of the big web or tech players, with their large cash reserves, bolsters their position in the digital entertainment market by acquiring a sizable catalogue of content for themselves? Might a consortium of British companies mount a bid with the aim of keeping the UK’s last major music business in British ownership, what, given the hoo haa that surrounded the news Cadbury had fallen into American hands? Or might Citigroup keep hold of the music company for itself, to give Parsons an entertainment industry toy to play with? It seems unlikely, though not impossible.
Meanwhile, how will the sale be structured if it were to happen, ie would EMI Group be sold as a going concern, or would the firm be split up before sale? It’s no secret that it’s EMI Music Publishing that most people will want to get their hands on, and some think a sale of that division alone would enable Citigroup to recoup the money it lent Terra Firma to buy the music firm in the first place.
But if EMI’s publishing business was to be successfully sold as a standalone business, what would that mean for the major’s recordings division? As previously reported, EMI Music Services – the recording division’s revitalised and expanded distribution division – is performing well, and might be an attractive buy, especially for one of the other three majors. But what about the EMI record labels?
Well, ironically, some are now saying that the label structure that has emerged out of the quagmire that followed Terra Firma’s acquisition of EMI is actually a good one, with some sensible systems and talented people. The current problem is that all the publicity of the major’s multi-billion dollar debts is making it hard for the company to sign the kind of buzzy new talent which can make a record clabel serious money if and when they break. That is to say, EMI arguably now has the right structure in place, but no decent new band (ie any being wooed by other labels) will risk using it, because of the debt concerns.
But, put the EMI labels into newer more secure ownership – even Citigroup ownership – and they might become a powerful force in the wider record industry. Whether another record company, like Warner, would be willing to admit that is another matter. Some reckon a Warner takeover of EMI would result in the latter’s labels and rosters being absorbed by the former’s existing recordings division.
To that end, the EMI labels might actually be better off if they were split from Publishing, and sold to a buyer who recognises the potential of what Terra Firma has built, and that the current failings are really the result of the debt scenario the equity firm created when it bought the major just before the credit crunch hit.
