The future for EMI – a lesson from Cadbury's

The future for EMI – a lesson from Cadbury's


norman lebrecht

February 02, 2011

Here’s a statement to EMI staff from CEO Roger Faxon. It is unusually clear and well-written – I see the hand of a good PR firm at work – and it gives a very upbeat view of the future.

There is, however, a huge flaw. I’ve posted it below, so you can first digest Faxon’s case, then consider the consequences.

In the last few minutes, we have announced that earlier today ownership of EMI passed from Terra Firma to Citigroup. The press release is attached for you here. It has been a long journey to this place. Much has changed at EMI and in our industry over the last three and a half years. What has not changed at EMI and never will is our fierce devotion to the artists and songwriters we represent. I believe that EMI, in both publishing and recorded music, is stronger today because of that commitment. Working together across both divisions, we are in the process of building a new business, a Global Rights Management business that will enable us to continue to deliver for successful outcomes for our artists and songwriters. We have the ability to shape our future and build a company that will not only survive but that will flourish in the years to come. Today’s change in ownership is but one step in that journey.

So how did this change of ownership take place?

Well, when a company’s value is less than its debts, one solution is to go through an administration process which allows the sale of the business in partial satisfaction of those debts. In our case it is not hard to see that our parent company Maltby Investments Limited (MIL) would never be able to repay the £3.4 billion it owed to Citi. With that being the case, it appointed an administrator who as an officer of the court was empowered to sell the EMI Group to Citi. This is sometimes called a “pre-pack” because it can be done in a matter of hours–and that’s exactly what happened here. EMI itself was never in administration. Where EMI came into the story was with its sale to Citi, which was followed by an immediate recapitalization of the company, which reduced our debt by 65%.

That’s how it happened, but what does new ownership mean for EMI?

Well first of all, it ends a struggle between our two principal stakeholders which has enveloped the business for most of the past two years. I’m sure that you’ll agree that the distraction has at times felt unbearable. We will now be able to put behind us the controversy of the Terra Firma-Citi court case, the cliff-hanging drama of the “will we or won’t we meet our covenant tests” and of course the never-ending press speculation. I, for one, welcome a respite from all that, though of course we will never be fully free of press speculation–we are EMI after all!

More importantly, this move finally puts EMI back on a solid financial footing. We have been burdened by an unsustainable level of debt which until today totaled close to £3.4 billion. With the change in ownership our debt has been dramatically reduced to £1.2 billion and we are sitting on more than £300 million in cash to boot. That gives us one of the most robust balance sheets in the industry. No one can any longer question our financial strength or our ability to compete head to head with our largest competitors. We already had a strong business–now we have the strong balance sheet to match.

Citi have made absolutely clear their support for our business and our strategy. They are committed to provide us with a stable and supportive environment to continue on our present course as we build that Global Rights Management business. That said, a music company–even one as great as EMI–doesn’t exactly sit comfortably in a giant financial services company like Citi. So while Citi is clear that they are under no time pressure to sell, and that they intend to stabilize the business, there is no doubt that in due course EMI will be up for sale just like it has been from the day Terra Firma bought it.

Most certainly, with the recent news about Warner Musicbeing up for sale, we will continue to be the subject of much speculation. The press will inevitably write that EMI will be broken up and sold in pieces. So, let me say this as clearly as I can: Global Rights Management is the future, and it takes both parts of the business working together to achieve that future. I have no doubt that the best possible way to yield the highest value for EMI is to keep our businesses together in pursuit of our strategy. As we move forward that will become evident even to the most sceptical observer. This is why I have every confidence that EMI will remain EMI for a very, very long time to come.

I’d also like to quash one other suggestion. Regardless of the country of origin of our owner, EMI remains a British company–both legally and spiritually. The history, tradition and heritage of this company cannot, and will not, be erased by a change in shareholding. We are EMI not because of who owns us, but because of who we are–the home of the greatest artists and songwriters of the past, present and future.

Finally, and most importantly, the change in ownership allows us to get back to doing what it is that so obsesses us, and what we’re all so good at–helping our artists and songwriters achieve the greatest possible success. This is, and needs to be, our sole focus. Nothing else is important. And it is full speed ahead. No one should worry about the future–it is in our hands. You should take comfort that Citi is committed to our success just as we are committed to the success of our artists and songwriters.

I want to take this opportunity to thank each of you for your continued support and dedication to EMI. That is what has made our incredible progress possible, in spite of the turmoil around us. It is that same support and dedication that will carry us forward as we forge a new business that can deliver real growth for EMI and success for the artists and writers that we are all privileged to represent.


So nothing changes, right?
Rubbish. It
may be a different set of suits, but they have a clear priority to sell the show as soon as a good price can be achieved. EMI is Rule Britannia and ever more shall be so, sings Faxon. Rubbish.
EMI is now owned by a New York bank and will in all likelihood be sold to a Hollywood entertainment company. Its heritage and traditions now count for less than they did even to a raider like Guy Hands, who was at least, UK-based. 
As soon as the company is sold, the new owners will in all likelihood, dismantle the London centre and to hell with heritage. What’s to stop them?
What happened to Cadbury’s last year will happen to EMI next – and, while chocolate is important, music matters more.


  • Marie Lamb says:

    Some have said that classical music is not that big a part of the pie at EMI, and that may be so. However, I wonder what will happen to a back catalogue going back to circa 1900, and how new owners might handle it. So much of that catalogue is of great musical and cultural importance, going back to the earliest days of commercial recordings. In recent years, it has been hard enough for those of us in the USA to get many of these earlier recordings, since EMI and other major labels have not been making many of them available–certainly nowhere near as many as they did in the days of LPs. Certain smaller labels like Naxos Historical that used to make such recordings available in the USA no longer sell them here for legal reasons, and Ward Marston can only dub 78s from old labels that became part of EMI because the company gave him permission to do so for his boutique label. Will new owners honor that deal with Marston? Also, those who collect the “Historic Masters” 78s that are pressed on vinyl from EMI-owned masters might do well to grab them while you can, since goodness knows what will happen to that series under new ownership.
    Although historical recordings might not be of interest to most music buyers, they’re precious to anyone who cares about the history of recorded music and sound, and they’re also vital for students of performance practice. They don’t just have value for collectors. I can hope that someone who understands their importance will somehow make them more available, not less…but I’ve seen enough to wonder if that will happen.

  • Michael P. Scott says:

    I seldom take issue with your opinions, but having spent what seems like several lifetimes pandering in the PR vineyards, I believe it far far far more likely that Mr. Faxon, himself, had more than a minor role in the writing of the letter.
    It’s bereft of PR speak; it’s clear, simple; believable; honest (or so it seems) and those are things that PR firm writers are generally incapable of. (See the book “Death Sentences” by Don Watson. Available on the US Amazon site.)
    Congrats to Mr. Faxon.
    If I’m wrong, I’ll write to the PR person personally and apologize profusely.

  • AVI says:

    But again, why does it matter?
    Faxon is right that “GRM” is the future for EMI (or one major part of it); I’ve been banging on along these lines for years, and they’re getting t the party a bit late, but perhaps in time.
    Does it matter if EMI ceases to have a smart office in Kensington, or a “London centre”? Does it matter who actually owns Abbey Road (either the studios, the brand, or both?
    EMI like most large companies will have been largely owned by international banks, pension funds, and other investment vehicles for years and years; why is it much different just because it’s now one bank? (and of course Citigroup itself is likely largely owned by a similar range of funds and individuals).
    If Citigroup are able to make EMI more profitable, that suggests that they are able to help EMI turn a corner to make music more folk wish to buy or pay a premium for, or to arrange the management and stewardship of their music and related assets better than they are at present. That’s a good thing.
    The old business model of a record label is dead; something that’s been truer and truer over the last few years, that I’ve talked about for a long time, and Norman, you’ve seen it for even longer.
    Clearly then, EMI has to change. It seems that this deal – removing a lot of EMI’s debt and leaving it with $300m in cash – is probably better for them than we or they could have dreamed of. Citi could have forced EMI into administration and sold it all off piecemeal right now. Instead they’ve taken a $2.6billion hit and are hoping to make a go of the business; I say good on them. What’s not to like?