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Faxon working on business plan to deliver EMI’s hastily concocted new direction

By | Published on Thursday 8 July 2010

When EMI made its rather sudden announcement last month that its publishing chief Roger Faxon would get a new job overseeing the whole of the music major, the accompanying press statement proclaimed the flagging London-based music firm would become a “comprehensive rights management company” as a result. It’s a grand sounding strapline, but, EMI insiders say, most people in the company are still to work out exactly what it means, except that yet another new business plan is being written.

Sources confirm that Faxon was a popular choice to lead EMI’s final stab at survival, amongst both investors and staff; the former impressed with the relative success of EMI’s publishing business, which Faxon has led since before Terra Firma’s purchase of the music company, the latter glad to have a proper music business man back in charge. And commentators have pointed out that, as the recordings side of the music industry becomes more focused on licensing music rather than selling CDs, it makes sense for record labels to work more closely with their sister publishing companies, who have been primarily in the licensing business for decades.

However, while Faxon’s appointment was clearly an attempt to restore confidence in EMI after it’s worst wobble to date – ie the six months in which owners Terra Firma had to conduct a very public scrabble around to find the money needed to stop the music firm’s bankers Citigroup foreclosing on its three billion pound loan – it seems those inside the label remain very much on edge. Not least because, once again, EMI’s senior management are having to create strategy on the hoof and to a very tight deadline.

Some claim that Faxon’s appointment to a new EMI-wide top job – certainly a surprise to those of us outside the music company – was a surprise to everyone on the inside too, not least Faxon himself, who had only a few days to consider taking on the new role before his appointment was announced to the world. It’s alleged that the haste with which the appointment was made was partly because Terra Firma wanted to quickly draw a line over an unhappy six months, and partly because the equity group’s top man Guy Hands had quickly tired of having former ITV chief Charlie Allen running EMI’s recordings business. Allen took over after former CEO Elio Leoni-Sceti suddenly resigned back in March, and stepped down to make way for Faxon last month.

The whole “comprehensive rights management company” shtick was similarly rushed to meet a press release deadline, it seems, and the actual strategy for delivering such a thing – ie the closer integration of recording and publishing divisions which, if anything, have been moved apart from each other in recent years – is only now being written. Faxon hopes to have his grand business plan, EMI’s third in less than a year, ready to share with Terra Firma and his own top team by September.

As we say, the basic aim of that business plan is actually quite logical, and everyone seems to think Faxon is the right man to implement such a plan. But, once again, time is against EMI’s leader. Although in theory Terra Firma bought its music company a year of financial security by raising the £100 million plus needed to meet Citigroup’s 2010 loan commitments, some in the investment community reckon most of the equity firm’s financial backers have already written off their big music investment, and if it wasn’t for Hands’ personal commitment to EMI, the money group would have long washed their hands of the company. So, EMI are only secure providing nothing goes wrong, and assuming that hole in the pension fund doesn’t turn out to be insurmountable.

Meanwhile, Faxon and EMI could really do with having things moving in the right direction before Hands and his team face off with Citigroup in the New York courts this autumn. As the money men fight out a highly public legal squabble about who did and said what during Terra Firma’s acquisition of EMI in 2007, scrutiny will once again fall on the music company, and some fear the scrutinisers might find a firm as financially wobbly as ever. It remains to be seen if Faxon and his integration strategy are enough to help steer EMI through all the choppy waters which are still ahead.