The end of Phase 1 of the sale and re-disposition to Universal and Sony of the EMI Music Group now leaves the beneficiaries to negotiate their way to clear the respective deals with North American and European regulators before getting down to the more heroic strategic steps they will require to take to integrate their purchases with existing infrastructures, and evolving efficient new corporate cultures for the integrated companies. I tend to agree with the view that the Regulators would be unwise, if not unlikely, to assume a hostile position to the Citibank sales in the prevailing economic environment and the continuing distress of the record industry despite the predictable representations of those like Impala and other independent labels.
Having been closely involved with both the ScreenGems/ColGems and the SBK acquisitions, my own judgement is that the outcome of Phase 1 is as good as EMI lovers like us could have possibly hoped for. Splitting the Publishing from the Records side of the business is quite sustainable for both businesses from an operational stand point, and secures for EMI’s music publishing interests re-unification with the executive leadership of Marty Bandier at Sony Music Publishing who was a key factor in building the immensely successful part of the overall EMI Music publishing business following the purchase of SBK.
Placing EMI’s historic record business directly under the reputedly talented executive leadership of Lucian Grainge, supported by Vivendi’s visionary Jean-Bernard Levy, seems a far more preferable option than burying it under a Russian autocrat who probably knows not yet the difference between Rock n’Roll and Church music and whose own goose could be cooked fairly soon unless he is able to find a workable solution to the destructive internal management politics and the desultory financial outlook for Warner Music itself which its most recent owner Edgar Bronfman has left behind. It would in my judgement have been equally undesirable to position it in the Sony Records group whose commercial history of working out the mechanics of Music joint ventures (with BMG) has been at least desperately problematic.
Together, Universal and EMI should be unchallengeable as the world’s leading Record company with nearly 35% worldwide market share – well beyond critical mass. (In certain important minority repertoire sectors such as Classical, the Company would bring to consumers the glorious historical catalogues of Polygram’s Philips and DGG with EMI’s HMV, Columbia, and Angel.) With Lucian Grainge’s experience and drive, it is to be expected that the consolidation of the international presence, and the resources and facilities of Universal and EMI in various markets around the globe should get accomplished with maximum efficiency, fairness, and speed, and the combined Group would have an enviable choice of excellent staffs and operators and hugely talented artistes’ rosters to operate its business profitably without undue vulnerability and without taking commercial risks beyond tolerable limits.
The dominant advantage for steering this very large record company through the challenging times ahead would lie in its international Management ability and not the nationality of its ownership. And finally, an enormously happy but important outcome is the fact that Citibank will assume responsibility for bridging the serious deficit in funding the EMI Pension scheme rather than leave this to the revival of consistent profits and cash flow from the notoriously volatile results of the future of the music business.
In recent exchanges of correspondence we (you, I and David Hughes) discussed the matter of the loss of “independence” that might befall EMI at the end of the Citibank auction. I had pointed out that EMI’s independence, in the true philosophic sense of the word, had already been “lost” since the Thorn ‘merger’ but that with the arrival of digital configurations, MP3, and then Napster opening up freely downloadable music files from the internet to consumers, the record industry had moved well past the point of large Companies’ and labels’ “independence” being a virtue if that meant operating on a stand alone basis. Indeed, the total disappearance of independent giants of the past like CBS, RCA, BMG, British Decca, and Polygram as ‘stand alone’ companies, and the constant struggle for financial survival, Quarter after Quarter, of both Warner Music and Sony illustrate the consequences today of using irrelevant and obsolete concepts from the past in judging what was possible, leave alone desirable, for the future prosperity of scalable record companies.
Historically, the real genius of Edgar Bronfman’s vision consisted of taking a relatively small “independent” base label like MCA and combining it with companies far larger than itself, securing global dominance in the process through the smart consolidation Management of labels as diverse and as historically distinctive as giants like Polygram and great independents like A&M, Motown, Island, and Geffen. EMI had started a not dissimilar process with the acquisition of United Artists, Virgin and Chrysalis, but Thorn’s ownership simply failed to encompass a larger vision for the future and we just waited far too long with absurdly experimental and amateurish ownership management before falling prey to an even greater absurdity and irrelevance like Terra Firma and Guy Hands!
In the last analysis, if Citibank’s Phase1 secures Governmental approval where necessary, EMI Music would fortunately have found its rightful place again with a grouping at the very top of an industry which owes so much to EMI’s inspiration, and to the generations of great creative EMI talent, and to EMI men and women who have served their Company with pride and dedication for well over a century literally from China to Peru!
Let’s muse more over these matters accompanied by cold Salmon at lunch soon!
BM
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