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EMI Music chief says he’s optimistic
By CMU Editorial | Published on Wednesday 9 June 2010
Charlie Allen, EMI Music’s Executive Chairman, says the British major’s recorded music division is in much better health that most commentators will admit; which is probably true, we’ve said before, if it wasn’t for the very public three billion pound debt with US bankers Citigroup – a bank EMI owners Terra Firma are suing – it would be easy to be positive about EMI.
While the cuts at the London-based music major have been severe and, for those working there, hard to swallow, a pretty sensible structure for a modern record company has emerged out of the chaos. And, if you ignore its failure to meet Citigroup’s debt covenants, EMI Music’s financial performance hasn’t been so bad, given the wider recession and the general state of the record industry.
And while the mega-bucks debt will hinder EMI when they try to sign the sort of in-demand ‘next big thing’ type talent from which major label’s can make serious profits (any artist manager worth their salt will be at least nervous about signing their talent up to a label with such public financial problems), it didn’t stop them signing Tinie Tempah, who seems set to become one of those cash cow artists.
So, there are reasons to be cheerful.
Though, while Terra Firma investors did stump up £100 million to ensure EMI didn’t default on its loan commitments, they didn’t – as Terra Firma chief Guy Hands wanted – throw an extra £250 million into the can to ensure the music firm had some financial security past next June. And with the major’s continued tendency to shed talented new execs on a pretty regular basis – not least the popular CEO put in place by Terra Firma themselves, Elio Leoni-Sceti – there is still reason to speculate EMI’s assets might become divisions of Warner Music and BMG Rights Management within two years.
But Allen remains optimistic. Speaking on a Radio 4 programme about the music company, he tells the Daily Telegraph’s business man Damian Reece: “[The £100 million] buys us at least a year. It is about trying to put the first building blocks of the balance sheet restructuring in place. Our margins are already well ahead of our competitors, and you’ve seen the business is throwing off cash”.
And as for the continued commitment of Terra Firma, their top man Hands, and their financial backers, to the music company that has proven so disastrous to the once prosperous equity outfit, he adds: “I think [the £100 milion] gives confidence [there] because why would you write a cheque for around £100m and not look to invest in the business further?” Why indeed.
