The recent verdict in the Citi/Terra Firma lawsuit has been analyzed more than the federal budget in the media recently. Reporters I’ve spoken with who were present during the entire trial say that there was a black cloud hanging over the courtroom during Guy Hands’ testimony. He acquitted himself so poorly that a jury of average New Yorkers decided that a megabank was for once telling the truth. Of course the idea that Citi fooled Hands, a Master of the Universe touted to be Europe’s savviest dealmaker and turnaround artist, was hard to swallow at the outset.

The following week Queen yanked their catalog from EMI after 40 years. This is the latest artist defection the label has suffered, along with the Paul McCartney and Rolling Stones catalogs as well as Radiohead’s high profile exit. One could easily speculate that the flood is not over, as Pink Floyd has had its own legal battles with EMI and could very well bolt when their deal is up.

And many industry insiders have felt that the imminent departure of Robbie Williams is a foregone conclusion, thus putting an even bigger dent in EMI’s future revenues. Let’s face it, how many times can you recycle the Beach Boys catalog after its been ground into sausage?

I had the opportunity to speak with Robbie Williams’ manager, Tim Clark of i.e. music, the other day about the label. Tim has been very critical of EMI in the past, most notably a very public spat with Hands when he first took over the label. “We’ve been quite pleased with what EMI has done for Robbie’s Greatest Hits album. They’ve worked very hard and done everything that we’ve asked.” When asked what the future holds for Robbie at the label, Tim just said that they’re taking a wait and see approach.

Similarly Brian Message of ATC Management, Radiohead’s representatives, told me “”One of the artists we work with is Eliza Doolittle and she is signed to Parlophone/Capitol.  As such we’ve worked closely with their front line label staff and have found them to be an excellent, motivated and talented bunch. EMI, the corporate entity, has clearly suffered at the hands of aggressive financial engineering but the core competencies of the people working with Eliza has been nothing less than impressive.” Not bad.

Another former EMI senior exec said that he’d always been a Roger Faxson fan. “Hands should have gone with Roger at the very beginning. At least he has a clue about the music business.” But is it too little too late?

This all came as quite a surprise to me, as I’ve been very critical of the label in the past. Although I’m actually pleased to hear this, it unfortunately doesn’t change much in the scheme of things.

Let’s say that Faxson wants to re-sign Robbie Williams or Coldplay or any other major artist. He’ll have to come up with big numbers. The problem is that he’ll probably not only need Terra Firma’s approval but also Citi’s. Not exactly an optimal situation.

The latest news to break is that WMG is readying a $750 million bid for EMI’s recorded music division. This is very interesting in that all of Warner Music, including the publishing arm, has a market cap of around $870 million and $2 billion in debt.

So how could this possibly happen and where would Junior get the money? One insider laid out a possible scenario that has Citi loaning Junior the money to buy recorded music and folding it into WMG. EMI would shed freestanding labels Virgin and EMI/Manhattan with only Capitol Records in the US and EMI in the UK. Blue Note could be folded into Nonesuch with EMI Classics perhaps merged into EMI UK. According to this insider this would result in an instant 50% savings and what would be left would be a Warner Music Group consisting of Warner Bros. Records, Atlantic Records, Capitol Records and Nonesuch/Blue Note Records.

Faxson issued a memo last week debunking all of the rumors and speculation. I’m not really sure that it meant much other than a rally the troops, feel-good, everything’s going to be fine message. After all, what do you expect him to say? “Yes, the Huns are at the door and you’ll all lose your jobs and be homeless”. I don’t think so.

No matter what Faxson says, it really doesn’t mean anything. It’s all out of his hands anyway. But one thing we do know is that if EMI falls into foreign ownership under the aegis of a tax exiled British subject, there just may be baying mobs with torches and pitchforks at the gates of Guy Hands’ estate on Guernsey. If you think that the UK media has been tough on EMI thus far, just wait.

© 2010, Wayne Rosso. All rights reserved.

Eeeeuuuuu. What's That Smell?

I know that I have been writing a lot lately about EMI. I know that it seems as though I’m beating up on them. But to paraphrase the great Willie “The Actor” Sutton’s response when asked why he robbed banks, “Because that’s where the money is”.

Last week brought lots of news from the ongoing soap opera that is now EMI. Losses, write downs, artist discontent, and what seems like endless executive turmoil have marked the tenure of new owner Guy “Ham” Hands. Mr. Hands, when acting as CEO of EMI, alienated artists and managers to the point that it boiled over into name calling in the press and threatened liable suits. There exists in the UK music industry a group of very influential artist managers who are referred to as “The Black Hand Gang”, and they all have or had important clients signed to EMI. The group includes Jazz Summers, Tim Clark and David Enthoven, Brian Message, Dave Holmes and loosely works together as sort of an ad hoc artists’ rights group in regard to their EMI artists. The Black Hand Gang holds all of the EMI major artist assets and Hands did not make a very good impression on them. So he finally wised up, some would say too late, stepped aside and brought in the perfect man to save the business–an Italian executive experienced in marketing soap suds.

Now things seem to be lurching into high gear. The Rolling Stones, Supergrass and Radiohead left the label and Coldplay only delivered their last mega-selling album on the condition that EMI have absolutely nothing to do with the marketing. Coldplay would handle it themselves and EMI would foot the bill. Then Coldplay decides to give away their next album, a live throwaway compilation, denying EMI some much needed billing. But the UK’s Daily Mail broke the story last week that EMI’s young female superstar Joss Stone is so pissed that she’s actually willing to buy her way off the label! You know you have problems when an artist is actually giving money to a record company.

Prom King Guy With His Queen

To compound the situation, The New York Post also reported on a rift between the once good chums Guy Hands and soap selling EMI CEO Elio Leoni-Sceti. The Post reports that the two came into conflict over EMI North America COO Ronn Werre. It seems that Hands wanted to give Werre a “take it or leave it” offer once his contract had expired. Werre went out and got a better paying job at Sony. Hands got pissed and wanted Elio to hire back Werre at any cost. Elio was embarrassed and Sony sued. So the upshot is that Werre is swinging a big dick, Elio has been emasculated and Hands feels like Henry VIII with a new girlfriend. So don’t be surprised if Ronn Werre suddenly becomes Guy’s new Jane Seymour to Elio’s Ann Bolyn and is crowned queen of the EMI prom.

Jr. Moves To London

And just to prove that all of the action is in London these days, our genealogically advantaged little buddy Edgar Jr. is rumored to be moving there. So how does all of this play into Warner Music’s longstanding effort to gobble up EMI? Pretty well, I imagine. Jr. will now be siting on the sidelines with the ability to quietly stoke the overheated British press and further pick away at the ailing EMI. The Brits look upon EMI as a national trust in a sense. A part of the English fabric. So it will be interesting to see how Jr. will sow the seeds of public discontent with Terra Firma’s ownership of the company.

So who will be the next artist to jump ship at EMI? I have nothing but gut instinct to base this on, but my guess is Robbie Williams, arguably EMI’s biggest star. My guess is that Williams and his management are so disgusted with what’s been happening at EMI that they feel they just don’t need them anymore. Why? Because IE Music, Robbie’s management firm, has a longstanding business relationship with Ingenious Media, the top media investors in Europe and one of the few independent investment firms committed to the music space. And besides, the IE guys know what they’re doing. And they don’t need EMI. At all. And don’t kid yourself–EMI made plenty of dough on the first of what is now called a 360 deal. If you knew how much revenue Robbie Williams generates, mostly outside of the US, it would bring tears to your eyes.

When Terra Firma first took over I was in touch with Guy Hands and company. I was having one of several long conversations with one of Guy’s emissaries one day–they were still moving into the EMI building, it was that early– when I told him that everyone in the record business would do everything they could to make Terra Firma’s EMI fail. He was astonished and asked why on earth that would be. My answer was simple. Schadenfruede. In the music business its not good enough for you to succeed, you must also see your friends fail at the same time. That no matter how progressive EMI planned to be, they would meet resistance from every other label. It ain’t like running rest stops on the autobahn. As it turns out, I was wrong. They’ve fucked up so much that they didn’t need help from anybody.

© 2009, Wayne Rosso. All rights reserved.