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:
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
You have worked hard and I like your conclusion. 6.5/10
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