“EMI’s auditors have raised ‘significant doubt’ about its ability to continue as a going concern in a report that lays bare the parlous state of Terra Firma’s £4.2bn ($6.5bn) investment in the music company behind Katy Perry and The Beatles,” Andrew Edgecliffe-Johnson and Salamander Davoudi report for The Financial Times.
“Guy Hands, Terra Firma’s founder and chairman, has written to investors in two of its private equity funds asking them to inject another £120m, subject to EMI Music producing a new strategic plan,” Edgecliffe-Johnson and Davoudi report. “He must come up with the money by June 14 or risk losing the company to Citigroup, his bankers.”
“However, accounts for the year to March 2009, released on Thursday, make clear that even if Terra Firma secures this equity, it will face another “significant shortfall” against a test on covenants in its loans by March 2011,” Edgecliffe-Johnson and Davoudi report. “Unless it can persuade Citi to restructure its £3.2bn in loans by then, investors face further cash calls. Terra Firma spent £105m to make up shortfalls against the quarterly covenant tests last year, but has less than £10m left for future payments.”
Edgecliffe-Johnson and Davoudi report, “Citi declined to comment, but one person familiar with its thinking said it had no plans to help Mr Hands by restructuring the loan. ‘They’re going to let him spin himself into the ground and will sit back and watch the show.'”
Full article here.
On the one hand, this is too bad, as EMI were the first to embrace selling music DRM-free on iTunes.
On the other hand, this is the same EMI who stop distributing its records to independent record stores.
Either way, with artists able to use the internet to connect directly to fans, large record companies like EMI are no longer strictly necessary. The market is reflecting this reality, and adjusting accordingly.
I would be much happier to have seen RIAA/MPAA substituted for EMI in this article.
Maybe EMI should raise their prices.
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Now for the other 5…
Revenge of “Edison-Bell Winner”
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“Either way, with artists able to use the internet to connect directly to fans, large record companies like EMI are no longer strictly necessary. The market is reflecting this reality, and adjusting accordingly.”
Trouble is, all of EMI’s artists are potentially fscked because they don’t own their music (EMI does), so they’re not allowed to use the internet to connect directly to their fans. Well, they’re certainly not allowed to sell EMI’s music directly to their fans.
This is an odd concept that musicians don’t own the music they write. They are essential indentured to the label.
I wonder if this is the right time for a new paradigm. Not sure how it would work but essentially ownership remains with the musicians / writers and the distributor / promotor gets income for what they do.
The problem is that the industry holds the only access for success, namely the promotion of music and setting up of gigs. Listen to the average radio station and they will play the same songs over and over again. The promotors essentially control what is played on the radio.
We need a more dynamic music industry to spur new innovation. I think emusic is the way but I don’t know if distributors like Apple or indie record labels, or individual musicians will lead the way.
Why can’t iTunes offer a model to recording artists like the one they have for developers on the App Store. Submit their music directly to the masses. Apple would earn more and so would the artists. Of course the main publishers might stop supporting iTunes if Apple becomes a defacto publisher.
@ Spark
That’s essentially what TuneCore does.
As long as people listen to radio, watch TV, etc, then the media $ companies (labels) have market power. I don’t see music TV and cable going away or pop radio, or advertising, so the only solution is to group together and start another market. But we have that already, iTunes and such. And, it’s not solving the problem.
The only other solution is a new label structure, maybe all indy labels coming together to market indie music. But that’s thousands of artists to market… how do you pick the ones to promote?…
The game is still market capitalism at play. Nothing’s changed. Even though the labels are hurting, they are still controlling the market. It’s still a tiny percentage of artists being played and promoted to the top. And how many of those top selling artists are independent? Virtually none. It’s still a major label world.
@ DogGone
“This is an odd concept that musicians don’t own the music they write.”
Yep. And it’s even more odd when you realize that the musicians pay for all of the recording costs. And anything else the record company can get away with making them pay.
And the company can do what they like with it, e.g. decide that it’s not making enough money so they shelve it, and NO ONE, not the musician who created it, nor anyone else in the world can legally sell it. Example: Andy Summers (from The Police) had about 7 solo albums; his record company was bought by a bigger one who decided that one compilation album was all the public could buy from then on.
It’s all about money, not music.
“They are essential indentured to the label.”
That’s it in a nutshell.
A couple of good examples: (these are hearsay, so apologies if they turn out to be not true) Coolio, after selling 2 million singles and 1 million albums (or vice versa, sorry I can’t remember) was still in debt (by $64k?) to his record company. And Steely Dan apparently didn’t get out of debt to their record company till their 7th album.
But are they much better off if they own their own music but everyone’s just steali… oops, I mean “sharing” it?
Unfortunately unless people pay for music then there won’t be much. The writing on the wall in that regard is obvious. The record companies are slow learners and keep charging more than people are willing to pay, hence the theft. iTunes has staunched a great deal of piracy by offering prices that people, rather than steal outright, are willing to pay. Most people don’t want to steal, but $15-$20 for a cd? yeah right. It’s no wonder people do steal. On the flipside of that, kids are rediscovering and sharing a lot of old music that is giving bands a second life so touring does become viable again for them, thereby making money for the artist, despite not having a song in the charts for years.
The article states:
/ Citi declined to comment, but one person familiar with its thinking said it had no plans to help Mr Hands by restructuring the loan. “They’re going to let him spin himself into the ground and will sit back and watch the show.” /
…to which I call BS! Citigroup may be a bunch of a$$holes, but they’re not completely incompetent. They’re not going to let EMI burn down without recovering the maximum proceeds it can. This may or may not mean the disassembly of EMI, but it certainly will NOT mean the destruction of the pieces of EMI that produce decent marketable entertainment pour vous et moi.
It might be better for the future of music if the megalabels who acted as though they were “too big to fail” were split up into many small independent companies that actually cared about music first and foremost.
For those who haven’t already read it, check out Steve Albini’s legendary article on the music biz:
http://www.negativland.com/albini.html
I buy a lot of music, movies & TV on iTunes and cannot remember the last time I bought an act on EMI or it’s subs. That’s not a problem with the market- that’s an A&R;problem.
@ Grigori
Thanks for the link! That should be required reading for all file sharers, and for anyone who naively thinks it’s easy to make a lot of money out of touring.
@ Brulek:
I really don’t there’s a problem with the quantity of music being made now, largely because of cheap home recording, but I can’t see how musicians are encouraged to put the time, effort and expense into making high quality music. Hell, they’d be better off not making any albums, and just touring instead, as long as they don’t mind perpetually living out of a suitcase away from their homes and families, and spending 10’s of thousands on plane fares and accommodation till retirement age.
I earn my living as a composer/musician, and well, I don’t think we loose that much when the recording industry dies. There was a lot of great music long before any recordings existed, and maybe it was a much more vital music-life then, when everybody had actually to play his music himself instead of just listen to it. Also, musical performances were much higher valued – you had maybe once or twice in your lifetime the chance to hear a Beethoven-Symphony with full orchestra… Today, you can’t even run away from it, every airport, hotel, shop you get bombarded with music. And the “no money for composers=no quality music anymore”-argument is ridiculous; what about Schubert, Bach, etc., they got less paid than me, composing far better stuff (handwritten, no macs back then)… By the way let me tell you, my higher quality-works are usually not the ones I make much money with… So I do projects for getting money (I have kids…), and then my private pieces… Personally, I think we live in exciting times, which of course some fear, but offer some new possibilities for others…
all musicians should follow this advice
Dick Dale street interview
Perhaps Apple should consider acquiring EMI intellectual property and then reworking deals with the artists. I’m thinking of something along the general lines of the App Store, but with different percentages given that Apple would have to fork over some serious dough for the music rights.
I don’t believe that baloney about how artists will quit creating music if the record industry doesn’t have its way. People were creating music for thousands of years before the record industry was started. Which record label was Mozart on, or Bach or Beethoven? The love of music is an integral part of the human mind and soul.
Still, it is sad to see EMI in its current condition. They are a storied record label with a great portfolio of music. They are getting ripped off by all of the piracy, and that is contributing to their demise.
@DogGone
The new paradigm is already under way. My album is distributed through TuneCore, which charges me a small flat fee to get my album placed into iTunes and for .99 extra each per year, all the other downloading sites I choose.
TuneCore services many thousands of independent musicians, newcomers as well as established ones.
My album is in the Folk category, in case you’re interested.
@ An Optimist:
“I don’t believe that baloney about how artists will quit creating music if the record industry doesn’t have its way.”
Not sure where you got that from. As far as I’m concerned the record industry should be shot and spewed on, but I still think people ought to buy music from the musicians rather than steal it.
@ Lemon:
“And the “no money for composers=no quality music anymore”-argument is ridiculous; what about Schubert, Bach”
I didn’t say “no quality music”, I said less encouragement to make high quality music. There’ll always be talented composers who are prepared to devote themselves to their craft in spite of poverty, but that doesn’t mean we should deliberately rip them off. Schubert was pretty poor, relying on the generosity of friends. Bach was a rarity, and always had full time employment as performer and composer. Wouldn’t you be creating more high-quality music if you could get paid reasonably for it and avoid the distraction of the better paying gigs you have to do?
Thanks macaholic, fantastic link.
@Spark
Doesn’t Apple allow anyone to submit their music already? I thought they did. In Rainbows was submitted by Radiohead (according to it’s iTunes page) instead of a major recorder.