Give me my music back !!!

It could the end of the music for EMI, the famous music company...

£1.75bn pre-tax loss, £200m pension deficit, £1.04bn write-down in value of the business and £223m interest paid to Citigroup. There is not rythm in the company any more, important artists, who has been with EMI for more than 40 years for some of them, want to quit... The record label is in a very difficult track and Elio Leoni-Sceti just left the orchestra after only 18 months at the chief executive's throne, after the label reported a £1.5bn loss for the 2009 financial year. It does not really sound good music for EMI...

What is happening to the famous record label, which saw the biggest stars in his studios? Is the new director, Charles Allen (former ITV boss), going to save the company from bankruptcy?
What do the newspapers say about EMI? Is there any solutions or is the clarion playing the last motion of the piece for the company?


Presentation of Electric Musical Industries (EMI) and its false notes:


EMI Group is a privately-held music company in the UK. It records and publishes music labels such as Blue Note, Virgin and Capitol Records. The groupe conducts business in about 50 countries, with licensees and distribution agreements in a further 20 countries. Electric and Musical Industries (EMI) was formed in 1931 by the merger of the Gramophone company and the Columbia Gramophone company. The EMI's products and services include artist development, audio and music video distribution, compact discsc, vinyl, cassettes and digital video discs manufacturing, music licensing, publishing and musical copyrights, but also motion picture and theatrical compositions. The famous artists who signed with EMI are: The Beatles, Joe Cocker, Paul McCartney, Pink Floyd, REM, Daft Punk, Placebo, The Rolling Stones, David Bowie, George Michael, and recently Coldplay, depeche Mode, Gorillaz, David Guetta, Robbie Williams and Kylie Minogue...
But EMI suffers from a drop of its market shares and of its competitors on the web's downloads. In August 2007, the company was acquired by Terra Firma Capital Partners (a private equity funds) for £3.2bn after a dramatic decline in sales and the announcement of a £260m loss in 2006/2007. At the same time the market share dropped from 16 per cent to 9 per cent.
Elio Leoni-Sceti, the CE who just left this week, had been called for his help in 2007 in order to turn the record label around and to put it in the good way. Indeed the company just fell into the hands of the bank Citigroup because of debts. Terra Firma (EMI's private equity owner) tried to help the company in injecting money since 2007: £16m in September 2008 and another £13m in December, £39m in March 2009 and £37m in June 2009. But the company still cannot pay off debts, even though its earnings in 2009 were bettre than the year before. Is the company still playing any music...?


Newspapers analysis:

The Financial Times was the first on the announcement of a loss at the begining of 2010. On the 25th of February, focuses on precise figures showing the really bad situation of the company, the newspapers explains that Elio Leoni-Sceti is working on a plan for Mr Hands, Terra Firma's CE, in order to present it to investors in the hope that they will see strong enough prospects to justify further investment. But the newspapers does not seem to see any future for EMI. It quotes Jonathan Shalit, a London-based manager: "EMI has a fantastic group of people, but the question is now are the financial shackles around EMI so severe that even the best people can't save the business". For the FT EMI has already a feet in the grave...

Then the rythm goes "crescendo" for EMI...

On the 11th of March, the Times' title is quite explicite:"EMI chief walks away and bands may be on the run". The Times also gives figures showing the situation (£1.75bn pre-tax loss, £200m pension decifit, £1.04bn write-down in value of the business, £223m interest paid to Citigroup), but it then focuses on the artists who want to quit. With the sales estimation it tries to explain how it could be difficult if these artists would quit the boat: 200m global album sales for Pink Floyd, 300m for Queen and 53m for Sir Paul McCartney, who are the three most important artists who could leave if the financial situation do not improve. the end of the article is quite optimistic, quoting Mr Allen, the new chief executive: "EMI is a fantastic company. We just have a very challenged capital structure. We're signing new acts and breaking hits. Have we got more to do? Yes." the the Times gives a small biography of Allen. EMI is not dead for the Times!

The Daily Mail is still shocked by Leoni-Sceti's behaviour. It quotes him: "My job here is now done and it's time to move on.", but reminds that the CE leaves at the worst time in EMI's history, when the company just has to convince investors to reinject an important amount of money in order to save the company before it falls in Citigroup's hands. Then the Daily Mail just wonders if the choice for the new CE, Mr Allen is the good one, explaining that Allen was not at his best when he left ITV: "When Allen left ITV in 2007, his reputation was not exactly unblemished, [...] The broadcaster is also set to lose around £150m on its takeover to Friends Reunited, which was the central plank in Allen's online strategy." The future is uncertain for the Daily Mail, but not as bad as it is explained in the Financial Times of the 25th February.

The Financial Times this week is always very pessimistic concerning EMI's future. To EMI's point of view the situation is worst than a month ago, the CE has quit the boat, artists are signed to Warner Music (the EMI's rival). It gives the situation with always lots of figures, and shows that Terra Firma did not help EMI at all since 2007, and then focuses on the debts to Mr Hands ( Citigroup' CE), who wants to cut costs. The FT finishes its article with a quotation of an analyst which does not give a chance to the company: "EMI doesn't have 20 years. It might not have 20 months."

The Daily Telegraph to his part focuses on the investors who already helped EMI since 2007, and the newspaper has the opinion that they would not help the company anymore. its headline is very explicite :" Terra Firma investors would rather not fell the pain of acquiring EMI". To the author's point of view is that the only way to help EMI is debts to be written off by Citigroup, because the investors would not inject the amount needed by the company. But it seems to be difficult with the will of the Citigroup's CE, Mr Hands, to cut costs as soon as possible...

My opinion:

It seems that the last note has just sound for the poor company... But I do not really understood in the articles what was the precise issue that has dragged EMI with it in such debts. The articles does not explain the real problems. In fact EMI has famous singers, and should not have such a bad situation and such debts. I founded that the issue are the competitors on the web download, but it is not explicitly explained in the articles that I have read. These music downloads on the web are a major issue for the music industry. Indeed the CDs are not bought anymore, but just downloaded on the web for free. The artists' concert just watched on the web too, and the artists would not survive in this situation for a long time ...

But what is EMI more affected by these downloads that its competitors? It is not explained... Is the EMI's problem just a bad positionning on the web for the downloads? It is a question to ask!!

I am sad when I read all these articles which do not really give hopes to the company. EMI has been the leader on the market for a long time, but its future seems really dark. I actually do not see how could EMI live anymore, too lots of money has been injected, lots of people tried to help, without any success. I only see one song for EMI this week, and it is not an happy one:

The funeral march of Chopin:

http://www.youtube.com/watch?v=3Z29STINh1w

sources:

"will ex-ITV boss hit right note at EMI?", Daily Mail, March 11, 2010,
"EMI chief walks away and bands may be on the run", the Times, March 11, 2010,
"Tera irma investores would rather not feel the pain of acquiring EMI3, the Daily Telegraph, March 11, 2010,
"Allen takes hot seat as EMI plays musical chairs", the Guardian, March 11, 2010,
"Artists aim to call tune on EMI's future, Financial Times, February 25, 2010,
"Allen task is to ensure EMI's record is a long-player", "Music fading as EMI tries to stem the decline", Financial Times, March 11, 2010

BP: which season for the sunflower?

Is it rather the winter or the summer of the four seasons of Vivaldi? Here different writers' sounds...

The 2010 strategy has been announced this Tuesday, the 2nd of March, and the sound is quite good for BP, which forecasts to boost its annual profits by £2bn over the next two or three years.

British Petroleum, founded in 1901 by William Know, is the world's largest private sector oil company by production volume. it is now present in more than 100 countries and employs more than 92,000 persons. The company operates through two main business segments; the first one is the upstream activities, which involve oil and natural gas exploration and fiels development and production. The second one is the midstream operations which involve the ownership and management of crude oil and natural gas pipelines, processing and export terminals. these two segments let BP being considered as one of the "most important instrument in the oil orchestra".


But this announcement has been received with some really different points of view. Indeed some are very preased to hear such "good notes from this Tenor". But for others this is perceived as overconfidence...


What are the BP's history and its situation at the end of 2009 which let the chief executive forecasting such news? Why are analysts so divided? With the actual economic crisi which affects the oil companies, and the uncertain future concerning the oil reserves, how can the CE be so sure about the long forecasts he just announced this week?


This is these uncertain future oil reserves and the long forecasts which motivated me to talk about this subject. In fact oil reserves are a really important issue for our future, and I do nor understand how oil companies can still hope to have a good future... Here is a new song for my blog...





BP's history in the recent past, the current situation and the CE's forecasts:


The company has been through difficult issues before 2007 when Mr. Browne was the CE. indeed the explosion of a refinery in Texas which killed 15 workers and some major oil spill in ALaska had damaged BP's wealth. In 2007 a new director has been put on the throne in order to "tune music with a good tonality". Tony Hayward re-managed the company with a recovery program in cutting 7,500 jobs and investing $2.4bn of management-instigated costs.

The new director has practiced its instrument with dexterity and is now a "maestro". The recovery program is nearly closed today. The operational availibility which had slumped because of the Texas' accident and other hurricanes at its US refineries has been restored, and the financial and operational performances have recovered relative to its peers. The Spleen is now behind the company.

Even though pre-tax profits fell by a half on the lower price and BP is only 55 per cent of the size of ExxonMobil (one of its competitors) by market capitalization, Tony Hayward just presented really good forecasts. He first wants to cut costs in boosting profitability by £2bn. He also plans to start 42 new projects (there were only 5 in 2009) and to focus on low carbon businesses. Finally he has the hope in raising the production by an average of 1-2 per cent a year between 2008 and 2015.

The tonality sounds good for the company, but how this news has been perceived through the newspapers?



Newspapers analysis:


The Daily Mail's article is the most positive of the fourth I will talk about. It announces the different measures in a really happy tone. The quotation of the CE chosen to support the author's point of view is quite clear: "The challenge and opportunity for us is that while our portfolio ranks among the best in the industry, our financial performances has yet fully reflect this". The article clearly sides with the CE's positive mind. For the Daily Mail, the Summer is here for BP:

http://www.youtube.com/watch?v=3dct8n7y2Y4&feature=related



The Daily Telegraph's article is quite close from the Daily Mail. It has the same tone in the measures' explanation and the same quotation of Tony Hayward. But it more focuses on the shareholders worries about the economic ciability of BP. It also explains the worries of analysts who are afraid that Shell has a stronger pipeline of projects. This article has a more ecological view with the problems of carbon dioxide emissions caused by the oil sands, but this stance on the matter can be explained by the author's specialization; indeed, Rowena Mason has an energy blog on the Telegraph's website. For the Daily Telegraph, it is rather the autumn, when the nature is dying slowly...:

http://www.youtube.com/watch?v=OgJYc9WE7xY



The article written by Ed Crooks in the Financial Times is the most neutral. The author first explains the measures taken by Tony Hayward in a "single-string tone". To Crooks' point of view the issues have been settled, the performance are at their best. Even if the company sold 10 refineries in the past years and is now selling marketing assets such as petrol stations in several African countries, he also explains that there are opportunities to raise profitability by bringing the US refineries up to the standard, of the bests, which are all in Europe.



This topic is also present in the Lex Column in the Financial Times. In this article Tony Hayward is quite adulated: "Hayward of BP has handled that role [alias CE]with distinction". Then BP is compared to his rival Shell which has invested in projects too, in order to give its superior production growth from 2011, and which has also cut costs which sounds liks good music today. The writer then analyses figures of the both companies, in order to show that they are both similar. For the Financial Times it is the beginning of the spring, with still some clouds in the sky, but with a good weather forecast:

http://www.youtube.com/watch?v=CSx6HrWV2XM&feature=PlayList&p=9A5469EC605BA2F0&index=14



The most negative article comes from The Guardian. In fact Tim Webb starts its articles sayig that BP "still has a long to go to improve its performance and cut costs". The quotation of Tony Hayward which he chose to illustrate his mind is quite strong: "Our financil performance still has some catching up to do. There is still a lot to be done". It is the opposite of the Daily Mail's tone. Then it is about the profit "of just $2.20 on each barrel, almost half last year's level and less than a quarter of the margins enjoyed in 2007é. It shows a really bad aspect of BP, and he finishes with the death blow: that come refineries could be closed. It is definitively the winter for the Guardian!:

http://www.youtube.com/watch?v=w8dq9NodWDY&feature=related





My opinion:


After the different positions, which is the real season for BP?

For my part I think that the Guardian is right in expressing some reservations. Indeed thet BP's finance is not as strong as it should be, when the CE forecasts such figures. I think that BP has always a long way to do and that some uncertainties should be taken into account...

But to an other side I really think that shareholders should not worry about the research in alternatives products such as the oil sands in Canada, because oil companies should invest in research before the end of the oil wells. Furthermore BP could be with this new product the future number 1 in new energy products thanks to this oil sand.

In addition it should be taken as good news given the current crisis and its context. Every news is good to keep!

For my answer on the first question, I would be on the summer's side for this song, I need some hope in the future energies!


The musical piece for the week, as you should have understood, is the "four seasons" of Vivaldi. There are the different points of views, optimistic or pessimistic, the uncertainty of the weather, here bound with the uncertainty of the energetic reserves...




sources:

"BP in drive to lift profits by $3bn by 2013", Daily Mail, 3rd of March 2010,

"BP targets $3bn more profit amid oil sands dissent", The Daily Telegraph, 3rd of March 2010,

"BP to cut costs and raise production", Financial Times, 3rd of March 2010,

"BP", Lex Column, Financial Times, 3rd of March 2010,

"BP will boost production, says Hayward", The Guardian, 3rd of March 2010,

BP, Datamonitor

http://www.bp.com/



2010 Strategy Presentation: Video:

http://www.gginternet1.co.uk/bp/ir/strategy2010/ggwebcast.asp?format=fl&bandwidth=hb