On the 14th of March 2010 I had posted an article concerning the financial problems faced by EMI, the most well-known music company in the UK. The firm signed artists like The Beatles, Joe Cocker, Paul MsCartney, Queen, George Michael and other very famous singers...
It was important to me to speak about that subject, loving the music, playing and teaching the piano. Indeed to me there is a huge problem which hits the music sector nowadays because of the free downloading on the web. Without these music companies the artists, to my opinion, will not be able to live from their music any more. Companies like EMI help the artists to record their album, to do the promotion of the artists, its new album, to organize concerts and the most important: to pay the salary, which is not a small thing..
In March EMI was close to bankrupcy: £1.75bn pre-tax loss and £200m pension deficit. Terra Firma, EMI's private equity owner, had to find investors to save the company. at that time it seemed to be a very difficult task for Mr. Allen (the new CE after the departure of Leoni-Sceti in March 2010) to save the music... With £3.2bn debts to Citigroup, the bank wanted to take EMI over and to cut costs as soon as possible.
The Financial Times was very pessimistic about EMI's future, saying that the investors would not agree to re-inject the amount needed by the firm, EMI being in a very bad financial position. The Times focused on the famous artists who wanted to leave the company after such bad resulsts and after the departure of Leoni-Sceti (such as MsCartney and Queen).
I wanted for this last article to come back to this story which is important to me; to see what have changed, if there has been a progression, if Terra Firma's investors are still supporting EMI or not, and if the artists who wanted to quit are always par tof EMI or not any more.
Newspaper analysis:
Le Monde is the first newspaper to re-publish an article on this subject, on the 29th of April. A really short, but an important one for the company! Indeed the article "After 40 years of collaboration, Paul McCartney leaves the major EMI" announces the very bad news. One of the most important artists of the company finally decided to quit. The article explains that the famous singer left EMI to become a Concord Music Group's artist, one of the most important independant music companies in the USA. But the newspaper does not give any news concerning the financial progression.
The second newspaper to announce another bad news is Metro (France) with its article entitled "Exodus at EMI, Queen's turn". A second artist has left the orchestra. The author explains that Queen signed with the main competitorn Universal, because EMI could not compete with its contestant, the price asked being to big for EMI which prefers to focus on new artists rather than putting to big amount on the well-know ones, who became to expensive for it. In this article too there is not many financial information.
The Financial Times on the 11th of May publishes "Terra Firma to inject more cash into EMI". Is it the first good news? The article explains that Guy Hands (Terra Firma's chairman) plans to tell Citigroup that he received enough "verbal assurances" to put another £105m into EMI. The author then contrasts the news, stating a source (unknown..) who assures that some investors still need approval from their invesment committees before agreeing formally.
But even if this news seems to be good for ZMI's future, Chris Briggs, the A&R who worked at EMI for years (with Robbie Williams for example) is leaving for SOny Music (another competitor) because of the new policy since the departure of Leoni-Sceti: "Some of the uncertainties have made it harder to sign new artists because of the amount of publicity Guy (Hands) and Terra Firma get with regards to the debt and trying to raise this money".
Terra Firma investors interviewed by the TF explain that if the reinjection is successful, it would force Citigroup to restrucuture its £3.2bn debts. Furthermore if it is not enough, Terra Firma could ask co-investors such as Canada Pension Plan, which have not been taken into account from now on.
The author finishes its article explaining that Terra Firma plans to ask a further £225m before the end of the year to cover demands in its loans until they mature in 2014.
It seems that EMI is recovering!!!
Bloomberg Business Week is got the last news today (the 14th of May). In "EMI says Guy Hands wins investors backing for EMI cash", the author starts quoting the EMI' CE (Mr. Allen): "We are pleased to have received this confirmation of an additional investment, which is a vote on confidence is EMI from Terra Firma and its investors, following the significant improvement in the company's operationg performance". The article is really positive, explaining that this amount will help EMI for its conenants until March 2015.
My Opinion:
The news this week concerning the positive vote of Terra Firme's investors is good news for EMI!!! Even if very well-known artists left the company, it shows the confidence investors have in this company, and that the company will maybe survive... I am really pleased to hear such news, but for how long would it be possible? It the CDs are not bought, I do not know how the company will survive, and investors will not be able to finance EMI during many years...
Furthermore the news came yesterday and the reaction of EMI'CE only came today. The reaction from the bank Citigroup is missing for the moment.
The music of the week:
The Fantastic symphony, Berlioz, 2nd mvt (with Leonard Bernstein as Director of the orchestra).
Lots of notes and the hapiness of the company with the funds coming from Terra Firma ..!
Sources:
"Terra Firma to inject more cash into EMI", the Financial Times, 11th of May 2010
"After 40 years of collaboration, Paul McCartney leaves the major EMI", Le Monde, 29th of Aprim 2010
" Exodus at EMI, Queen's turn", Metro, 10th of May 2010
"EMI says Guy Hands wins investors backing for EMI cash", Bloomberg Business Week, 14th of May 2010
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