EMI Derby Ramps Up As It Winds Down
EMI auction nears finish line
Numerous recent reports have Citigroup closing a deal (or two) for the sale of EMI by the end of this week, including a New York Post piece today claiming that a fight for the recorded music arm is down to billionaires Len Blavatnik, whose Access Industries now owns Warner Music Group, and MacAndrews & Forbes Worldwide chairman Rob Perelman. On the publishing side, KKR and Bertelsmann-backed BMG Rights Management is being called the clear frontrunner, though Sony still isn’t being completely counted out. New Bertelsmann CEO Thomas Rabe who is said to be making the rounds in New York this week, is very familiar with EMI, previously serving as Bertelsmann CFO since 2006 until his recent promotion, where he kicked the tires on the music group prior to Terra Firma’s acquisition of the company in 2007 and then again at EMI Music Publishing in 2009, in discussions that likely included Citi as well… As we mentioned back at the outset of summer, Warner Music and BMG all along have been the favorites to end up with EMI’s recorded music and publishing arms, though many other suitors entered the bidding fray as expected as well. Among the many questions we are hearing with regard to the likely new owners of EMI, is the fate of current executives on both sides following a deal – including EMI Group CEO Roger Faxon, WMG’s Edgar Bronfman Jr., Capitol & Virgin NA label prexy Dan McCarroll, EMI Music Publishing’s Big Jon Platt, BMG’s Hartwig Masuch and Laurent Hubert and many others… Stay tuned.
10.20.11Digital Round Up: New Google Music plans revealed, Rhapsody stands up to Spotify & more…
Going beyond beta
Back as a hot topic in the music + tech arena this week is Google Music, which follows the company’s halfhearted initial step into the cloud-music sector earlier this year with Music Beta. Now it appears that Google will be launching a digital music store in the coming weeks, but with a “twist,” as it is being reported, following Android chief Andy Rubin’s appearance at the AsiaD conference this week. Cnet reports that the twist will likely be social features, which will enable sharing capabilities among users – social enhancements are being touted as a big driver behind Spotify and similar services recent rapid growth. According to multiple reports, the only major label close to an agreement with Google right now for the new music service is EMI, while a number of independent labels are apparently already onboard. Other bits concerning the new Google Music talk include whether or not it will have a ‘mirroring’ component or ’scan and match’ that finds music already on a users’ computer – a feature that Apple’s upcoming new iCloud music offering will feature. Or as noted by Evolver.fm – if Google follows up their digital store by offering their own streaming-music subscription service, it could achieve the same outcome. Currently users of Music Beta have to upload their music to Google’s cloud-based music locker. While seemingly late to the game in all this, some observers are noting what a huge advantage and launching pad Google-owned YouTube will be for any new music service they bring, as the video site continues to reign as the largest free music site around… Following the recent acquisition of Napster, veteran music-subscription service Rhapsody continues on the publicity trail, with executives recently interviewed by Business Insider among others and speaking at this week’s CMJ Music Marathon conference. The biggest question has been about sustainability and relevance in light of all the new similar services, mainly Spotify, and how they plan to compete. But Rhapsody maintains that their business is healthy, they received a boost from all the press surrounding the aforementioned European startup’s launch in the U.S., and with the new Napster customer-base and planned wireless and cable provider deals, they’re doing just fine, and without a free offering to entice new users, for now… And how much of all the optimistic talk surrounding the bourgeoning on-demand and streaming music territory is hype vs. substance? A new report from the NPD Group, studying music listening habits, does show that in America at least, newer ways of accessing music are gaining real ground on traditional radio and CD listeners, with possibly the most revelatory statement being that “a tipping point is approaching when vehicles and portable devices move from a tethered connection to a more integrated one” – read more in the press release… In other quick items… Pandora has named its first chief marketing office in Simon Fleming-Wood… New music service Beyond Oblivion Inc., also known as Boinc and partially owned by News Corp., is reportedly close to finalizing licensing agreements with the four major label groups… Jimmy Iovine isn’t the only Universal Music exec with a penchant for high-end audio, as music industry veteran and co-CEO of Sanctuary 5B Artist Management, Carl Stubner, has been named to the advisory board of high-definition audio company Max Sound… And the popular music curating and aggregating site The Hype Machine has reached 1 million users.
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Adventures in Babysitting: Six degrees of representation
West Coast labels have started circling new buzz act Youngblood Hawke, though the scuttlebutt appears to be that there’s some confusion over who is actually rep’ing the band, which features two former members of Iglu & Hartly – currently on ‘hiatus’ after a long and turbulent cycle following their debut and only album & Then Boom. Several “young managers” have been busy hustling meetings around town with A&R players, falsely posing as Youngblood’s managers (not realizing that fractured as the industry may be, folks still do talk) – especially when something smells fishy. Those keeping score may remember a similar scenario occurring during the bidding derby for All-American Rejects a few of years back… Meanwhile, word is that former EMI A&R executive Steven Melrose, who departed the label under incoming prexy Dan McCarroll last fall, has been serving in an unofficial capacity as the band’s manager. Once his contract is up, he’s expected to take an official role as part of their management, hopefully before any hawks waiting in the wings swoop in. Youngblood Hawke started their October Monday night residency at The Satellite this week.
Bits & Pieces: BMG Rights Management buy Bug Music, EMI auction slows & EU extends life of music copyright
Following reports last week that Spectrum Equity and Crossroads Media, owners of Bug Music, were accepting second round bids for the publishing company, came the news yesterday that KKR-backed BMG Rights Management has snapped up the independent pubco, for a price that is being rumored at $300 million. The acquisition, which is expected to be closed by October, will essentially double the catalog size of the KKR and Bertelsmann joint venture. Bug Music CEO John Rudolph is also reportedly suing the owners of the pubco, over a 2% equity stake in the company which he was promised… Of course, BMG RM is also currently bidding in the EMI auction, with its sights set on the publishing arm. An article in This Is Money over the weekend stated that bidders in the EMI auction are frustrated by Citigroup’s slow-pace in the process, and believe it is in an effort to give private equity parties enough time to raise cash to remain as contenders given the troubled financial markets… Good news for those vying for EMI, as well as many other record companies, is the decision by the European Union to extend the copyright term on sound recordings from 50 to 70 years. Many point to the mass of popular recordings from the 1960’s by numerous British artists including the Beatles, the Rolling Stones and many others that would begin to come up on term within only a few years, as being a primary reason behind the ruling. While the announcement was made as being a major boon to artists, in protecting works, others see the move as furthering what has been a negative situation for the many older artists and performers in the new digital age. The storyline also parallels that of the current copyright termination issue going on in the U.S., though there is no such reversion clause in the European law.
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Bits & Pieces: Just when you thought it was safe to buy EMI, Legal-Eagle Don Henley & Bug Music still for sale
Guy Hands; Looking for answers
Another potential wrinkle appeared in the current auction of EMI this week, with the reappearance of Guy Hands, who is taking legal action to recover documents explaining the basis for Citigroup’s takeover of the music company in February of this year. According to initial reports, Citi tapped PricewaterhouseCoopers to handle administration of the takeover process, and Terra Firma is now taking action against both parties after previous unsuccessful attempts to acquire a satisfactory explanation. After Hand’s courtroom defeat at the end of 2010, it was believed that the EMI takeover would not come until closer to summer of this year, given the debt-payment schedule, however the bank took action in February, after rumors in January that they were already shopping for buyers. So far Citi’s response to the initial sentiment that this new twist could cause a serious problem for their auction of the music group, was to indemnify all bidders currently pursuing EMI, according to the Financial Times. Some insiders are wondering if this isn’t just more posturing from Hands in an attempt to strike a blow against his former lender, particularly after recent widespread speculation that EMI could fetch a much higher price than originally believed. Considering the scuttlebutt earlier this year was that the abrupt takeover came as a result of threats from his own investors, one in particular, the answer might be yes… This latest development surrounding the EMI auction, comes after talk that the looming copyright termination battle royale, is also effecting the bidding process, though most observers share that neither issue will likely have crippling outcomes… Meanwhile, continuing his rounds with the press as artist-spokesman for the copyright termination topic, Don Henley speaks to Rolling Stone about the copyright law, options that artists have and how the record companies are not going to take it lying down… And according to the New York Post, independent music pubco Bug Music is taking second-round bids from interested parties, including KKR-backed BMG Rights Management, Ole Music and Imagen among others…
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Bits & Pieces: More Executive Changes at RCA, EMI-MP3Tunes Ruling, AEG, Ticketmaster & more…
More changes emerged at Sony Music this week under new CEO Doug Morris, who appears to be positioning all operations to fall under four main groups – Epic Records, Columbia Records, RCA Records and the yet-to-be-named Dr. Luke-helmed label. The new executive team under RCA was announced, and includes Joe Riccitelli as the head of pop/rock promotion while Keith Naftaly, Rani Hancock and David Wolter will hold senior A&R posts – more details and names of new promotion and marketing executives can be found here. Along with the good comes the bad for some, as various reports today have layoffs in the double digits coming from within previous Jive/RCA aligned marketing, promotion and A&R departments. Meanwhile, it appears that other executives have left the Sony fold on their own accord recently, with the new direction being taken and company atmosphere cited among reasons… A judge’s decision this week in the EMI vs. MP3Tunes case left no clear winner and it is being seen as a mixed result for both sides. While MP3Tunes’ protection under the Digital Millennium Copyright Act, was upheld, the ruling claims that the service is responsible for acting on ‘take down’ notices and that users who upload copyrighted material can be held liable, including founder Michael Robertson. CNET has more on what is left up in the air with the ruling… A newly appointed marketing executive at the Specific Media-owned MySpace, talks to AdAge about the site’s new direction and claims that iTunes, Vevo and Spotify will be more appropriate competitors for the network rather than Facebook… Elsewhere, AEG has entered the ticketing arena with the launch of axs.com – a result of a new partnership with Outbox Enterprises – the new service is presided over by former Ticketmaster CEO Fred Rosen… Facebook and Ticketmaster have announced a new partnership that will provide added connectivity via the social network for interactive seating maps, Fast Company has all the details… And the L.A. Times examines the results so far of Arbitron’s latest research gizmo, the Portable People Meter - (we wear short shorts).
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Bits & Pieces: Copyright Termination Gets Spotlight, EMI Merger Scrutiny & more…
An article in the New York Times on Monday, which focuses on the looming copyright termination period that will start in 2013, has stirred up wider attention to an issue and era that record labels and music publishers have had on their calendars for years. The end of the 1970’s into the 1980’s was a time when many now-classic albums were released, helping to bring about a surge in album sales at a time when it was much needed – that coupled with the advent of the CD, carried the industry to the end of the century on a high. The potential loss of copyright ownership to both master recordings and underlying compositions starting in less than two years from now, has the capability of delivering a serious blow to the already beleaguered labels. Today a follow up piece on the Times ArtsBeat blog featured a Q&A with Don Henley, discussing his efforts to inform artists of their rights to get back ownership of their works… The Los Angeles Times examined the possibility of an EMI merger with one of the other three major music groups over the weekend, making comment that regulatory hurdles might not be what they once were. The decade-long industry decline and the technology advances that have corresponded, can be seen as having lessened dominance by the major labels and more importantly decreased the power to dictate consumer pricing, as the article’s sources mention. However, the ability to stifle technology in the form of new digital music services that need licenses from the labels should be considered… Elsewhere, Bruno Mars manager Brandon Creed has been hired as an A&R consultant for the reshaping Universal Republic and Island Def Jam Motown labels, reporting to label group CEO Barry Weiss… HTC made a large investment in Beats Electronics, the headphone company founded by Dr. Dre and Interscope Records ruler Jimmy Iovine, hopefully allowing the two more time to release Dre’s long-awaited next album and focus on winemaking. Forbes reports that the deal could potentially make Dre one of hip-hop’s richest… And is Turntable.fm more hype than hope? The number of unique visitors to the site in the month of July was reportedly just over 200,000 - not exactly game-changing, yet at least.
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More Executives Named as New Structures Emerge at Universal and Sony Music
This week saw official announcements from Universal Music Group and Sony Music that reveal more of the emerging structure at both music groups under the new leadership of Lucian Grainge and Doug Morris respectively. As expected, Sony announced that A&R veteran Peter Edge would assume the role of CEO at the reshaping RCA Music Group, which will be comprised of RCA, Jive, J and Arista, while Tom Corson will act as COO of the label group. Morris also named Edgar Berger the new head of international at Sony Music, coming to the role from his previous post as CEO of Sony Music in Germany, Austria and Switzerland. Berger, who came to Sony from Bertlesmann in the 2004 BMG merger, began overseeing label operations in Germany in 2005, remaining in place after the two split… Meanwhile, Universal Music has tapped Rob Stevenson as Executive Vice President of A&R, a “newly created position” at Universal Republic Records. This sees Stevenson returning to Universal after leaving his senior A&R post at Island Def Jam in 2006, and most recently serving as EMI’s Virgin Records U.S. prexy until departing last year under the incoming Roger Faxon and Dan McCarroll. Some astute observers are wondering what the appointment of Stevenson means for Uni/Republic’s Tom Mackay, who has served in the same role of EVP of A&R since 2009? Recently overseeing Universal’s partnership with NBC show The Voice, and spearheading the formation of the label’s new JV with World’s End Management, Twenty First Republic, it’s yet to be seen what new role Grainge may have in store for Mackay. Other names being bandied about as expected arrivals within UMG include former Warner Bros. Records CEO Tom Whalley and songwriter and former president of Epic Records, Amanda Ghost… Stay tuned.
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More Bits & Pieces: Former EMI Head Among Bidders for Label, Live Nation Links with Walmart & Lockerz, Palmese Departs & more…
According to an article in the New York Post, private-equity firm Apollo Global Management was among the initial bidders in the Citigroup auction of EMI, with former EMI North America head Charles Koppelman onboard as part of the effort. Those keeping score remember that Apollo recently acquired CKX, who among other properties, owns American Idol production company 19 Entertainment. It’s unclear whether more recent EMI chairman Charles Allen, is among any of the groups who bid on the music company – Allen expressed his interest back in April… A new partnership between Ticketmaster and Walmart was announced this week, with the retail giant set to sell tickets in stores via kiosks, offering fans a “very convenient way to learn about upcoming events, purchase and take home tickets without leaving their neighborhood,” said Ticketmaster CEO Nathan Hubbard… Ticketmaster owner Live Nation Entertainment is also reportedly a new investor in e-commerce start up Lockerz, a social-oriented service that allows members to earn points to put toward purchases, which now includes concert tickets. EMI is also ready to begin utilizing Lockerz, in a partnership that will see the label providing up to 10,000 videos to users, according to Billboard.biz. Insiders point to the Seattle-based service’s alliance with a full-service big name agency as a key component in the new tie-ups in the music space… Elsewhere, today is the last day on the job for RCA EVP of Promotion Richard Palmese, who is expected to head to Azoff Music Management Group in some capacity, reuniting Palmese, Irving Azoff and their middle fingers. As recounted in music business tomes, the two famously worked together at MCA Records during the 80’s and 90’s… And The Guardian examines the “on air, on sale” practice, recently adopted in the UK in an attempt to combat piracy, a policy which apparently has not been embraced by all labels uniformly. Meanwhile, music revenues in the UK were revealed to have dropped by £189 million in 2010.
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Bits & Pieces: Citi Receives 10+ bids for EMI, KOL Cancel Tour to Tune of $15million, Turntable.fm & more…
Worth more than Warner Music?
The first round bids for EMI are in, with multiple reports pointing to more than 10 offers received for either the whole or individual recorded music and publishing arms of EMI Group, from interested parties including Sony, Universal, Warner Music, BMG Rights Management and a host of private equity groups. At least one analysis this week claimed that Citigroup could possibly fetch more than $4 billion for the company based on a similar multiple used in the recent Warner acquisition. An article in FT.com yesterday claims that the current tendered bids range from $3 – $4b, and that between four and six of the submitted offers were for the entire music group. Citi is expected to respond to the opening bidders this week… While less humorous than last summer’s Kings of Leon bird droppings incident, the band’s cancelation of the remainder of their current U.S. tour dates following an abrupt termination of a set in Dallas last week, may prove much more damaging. Rollingstone.com takes a look at other recent tour cancelations with somewhat dubious explanations, and according to reports, the KOL cancellation may cost policy holder, Loyds of London, as much as $15 million in payouts to promoters and others affected… The much talked about Turntable.fm has secured a $7.5 million financing round led by Union Square Ventures, which has some wondering if the startup will next seek licensing agreements with the record labels and music publishers. Lady Gaga and Kanye West are also reportedly among those who contributed to the funding… And The Shins are following fellow former Sub Pop label mates Band of Horse, in moving from the venerable indie to a new imprint-label deal with Columbia Records for their next release.
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