6 posts tagged “emi”

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Talent for Finance

EMI are making headway again. Thanks to the new management.

Following on from his £3.2 billion purchase Guy Hands has got hands on and finally he is reaching the parts other financiers cannot reach.
It seems that running a label is just like any other business. Especially when it comes to dealing with the A&R side of life.

Guy recently described his version of a day in the life (sorry John and Paul), “[He] gets up late in the day, listens to lots of music, goes to clubs, spends his time with artists and has a knack of knowing what would sell.” There is a lyric if ever I heard one! Imagine that with a piano and wafting harmonies... mesmeric!

It is ironic that EMI is the label that launched the Beatles, under its Parlophone brand. Have they really got so far from the reality that talent no longer matters?

Of course I agree with the sentiments in part. After all I have spent and lost a fortune on backing dead horses but surely without the will to nurture and promote artists there is nothing left but back catalogue and no future for the music industry. But there comes a point when you have to say "HOLD ON THERE COWBOY!" and this is it.

Guy has accused the A&R guys of deliberate lunacy. He says that they could have done financially better if they had stapled $50 to each new CD. Of course they could, but so could Standard Oil if they hadn't invested in drilling new fields. The thing is you need to invest to create and that is the bit Guy has forgotten. Pete Pahides of the Times putit succinctly when he said "record labels, like football clubs, understand that a reputation for spotting and nurturing young talent is the basis of sustainable success. Once, the long view - artist development - was what made labels such as EMI so powerful. Now Hands speaks of “taking the power away from the A&R guys and putting it with the suits - the guys who... sell music”

Terra Firma (the vehicle that hands controls) have already sacked 2000 staff and I applaud some of that - the  majors are overloaded with dead wood and it had to be done but attacking the root core of your industry is just insane. By all means shake the tree and get rid of the brittle branches but be careful not to chop the entire plant down.

By all accounts Hands is addicted to Karaoke - which is not the best lineage for a man involved in new music - but he is also the man that made Coldplay and Robbie Williams complain about maltreatment, so he can't be all bad.  He has made oodles of cash in the past but he has also made some major blunders. (His deal to sell of Thresher liquor stores was a dud.)  It remains to be seen what he can do now, but my advice for all of us in the indie sector is to ignore everything they are doing. It is big business and there are big business rules in play. It has nothing at all to do with us until they get it all figured out and we have something tangible to learn from.

Good luck Guy, you are going to need it!

The past few weeks have thrown up an interesting dilemma for both musicians and labels.
The new owners of EMI have finally come to realise how wasteful and idiosyncratic the music business is.

Guy Hands - entrepreneur and business guru - came into the business thinking that the regular business rules applied to music. Boy has he been on a steep learning curve! In certain circles he is a doomed man. In others he is a savious - we shall see what pans out. My money right now says that he is going to get a big kicking over this one. He is a regular guy who has no experience of the idiocy and mad habits of most music execs let alone their bands.

Take for example his anger when he discovered that EMI regularly spends £200 000 on "flowers". Mr Hands issued a directive to all his new staff (5500 of them no less!) that flowers were no longer on the menu. Except "flowers" on the accounts is really a euphamism for Cocaine and spliffs.

When you consider that Robbie Williams and Amy Winehouse are on EMI you suddenly realise that if the label is declaring £200 000 (about $400 000) on its own books then the real figure has to be at least double that. Each sub label has its own expenses account and there are a hundred ways to hide the dealers margin in there as well. That £200K is just the stuff they couldn't hide!

Then you have to look at the way EMI have spent millions of dollars re-paving the Chinese roads recently.

Seriously, they have been shipping their returned CD's to a rendering company in china where the latest albums are shredded and turned into road aggregate. The rumour has it that last year they pulped over 12 million albums that way and if you have ever had to chuck away the overrun on a pressing of albums you will know what a huge volume that is. It is almost criminal but itis still more cost effective to do that than to re-cycle them - due mainly to the carbon taxes that are levied on large companies.

Don't go thinking that EMI is run by idiots. It isn't. It is just the most open about its mistakes. When you consider that EMI is the smallest "major label" you can really get an idea of how wasteful the others are being. God alone knows what Warners pulped last year!

So what should they do about it?

Well first of all they need to make labels responsible for their actions.

The super-fund labels like Parlophone are able to out-muscle everyone on the block and get their acts front and centre regardless of merit. That made sense before but unless you are betting on just one or two big acts to break the bank this year it is also the easiest way to make sure your bottom line is destroyed from within. If Parlophone pays $10 000 for an ad then that is the benchmark for all your other labels and acts and it is tantamount to giving your profits straight to someone else. It is loopy.

Well, there are lots of remedies but hardly any of them will work unless and until they break down the business into a few segments that really work well.

For example there is no need to have all those different back room staff replicating menial jobs. An accountant is an accountant and a stock taker is a stock taker.

Advertising should be amalgamated and streamlined into one department.
Marketing should be part of an internal market that each label pitches for.
A&R should be devolved into a a department of its own with a much bigger budget than it has at present and the emphasis should be on attracting talent and then keeping it.
Online sales are crucial so each department should be forced to consider its approach to digital media.

All that works for the big four but it will not happen in the next few years. Instead we will see a tranch of headlines and initiatives as the incumbent managers line their pockets for the last time and allow the artists to fade away.

I have no issue with any of that. It is time for new blood to emerge. Because, let's be honest about this. Music is no longer thrilling it s a boring business that no one wants to know about. The real money is on computer games and all we are looking at is the last gasps of a dying breed.

I wish I could tell you how many times I have been told recently that Radio head were brilliant businessmen when they told EMI to stuff its offer for the new album but I can't count that high. I also can't agree.

£3 million was the bid that Mr Yorke found insulting. Personally I would have lubricated my nether regions for that kind of dough!

In the event, even with their massive publicity and clever online strategies they will be hard pressed to make much more than that from sales. People simply are not prepared to pay for music anymore and despite charting at No1 the way they have moved from digital to physical will only make the new fans annoyed and old ones depressed.

Radiohead are amongst the last of the superbands and whilst I respect their need to make as much as they can whilst they have a fan base I despise the fact that none of that money will go back to the people who invested in them when they were just some weird kids from Oxford. We don't need superstars at Greenpeace rallies - we need them at a gigs at the Firestation, supporting the next generation. Without that there is no future for musicians anywhere.

So I really do think that Guy Hands was right to tell them to sod off. The days of mega deals are over and it is the era of the niche.

Just last night I watched a BBC film about Sigur Ros. You don't get much more niche than that. An Icelandic band that sings in a made-up language with a string quartet. Do you know what struck me most about them? They were happy. They had no hangups and they were totally niche.

EMI paid £19m to get out of a contract with Mariah Carey in 2001

EMI was bought by Guy Hands' Terra Firma private equity house in August for £2.4bn.

In an internal memo obtained by the Financial Times, Mr Hands set out his plans for the future of EMI.

"Some [artists] unfortunately simply focus on negotiating for the maximum advance," he said.

Unlike the investment banking world that Mr Hands is more used to in which bonuses are linked to performance, advances are paid to artists regardless of the success of their albums - "advances which are often never repaid", the memo bemoaned.

Mr Hands said that eventually it would "be open to us to choose which artists we wish to work with and promote".

No specific artists were named in the memo and it added that "many spend huge amounts of time working with their label to promote, perfect and endorse their music".

Mr Hands also plans to find better ways to reward executives and encourage them to work together.

He blamed the current situation on "a compensation and management system put in place over the last 20 years which does not encourage the right behaviours or reward the right actions".

One of the low points for EMI came in 2001 when it paid £19m to get out of a contract with Mariah Carey, one album into a five album deal.

Amy Winehouse is one of Universal's artists

It will allow the sale of thousands of albums and tracks available in MP3-form without the protection, known as digital rights management (DRM).

Most major recording studios insist music sellers use DRM technology to curb online piracy.

Universal artists include 50 Cent, the Black Eyed Peas, and Amy Winehouse.

Universal said: "The experiment will run from August to January and analyze such factors as consumer demand, price sensitivity and piracy in regards to the availability of open MP3s."

Retailers including Google, Wal-Mart, and Amazon.com, will participate in the DRM-free trial, Universal said.

But participants do not include Apple iTunes online music store, the third largest music retailer in the US.

Universal are cleaning up my friends

In a fire sale they snapped up Sanctuary for about 40 million pounds today - less than 30% of  its value a year ago.

Don't say you weren't warned.

Next for the chop EMI - no new signings once Guy gets his Hands on  it.

Is this the time that we should make a play for BMG and buy it for a song?