EMI, second act ...

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 ..!

http://youtbe.com/watch?v=npg11G8ZkAY&feature=PlayList&p=E930D65C37E22DF1&playnext_from=PL&index=0&playnext=1

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

Argentina wants to come back into the orchestra

On Thursday (15th of April), the news concerning a possible restructuration of a €20 billion debt seemed to be a great march for the country and for the holders of bonds still unpaid since 2001.

Argentina reimbursed on the 5th of April 2010 $203.6 million with the reserves of the Central Bank. It was the first time that the justice authorizes the country to take money from these funds in order to pay back debts to private creditors since 2001. Indeed, at the beginning of the 90s the country wanted to attract foreign investors, the "Hoodouts" and reduce inflation. It had been set up with the "currency Board" system with the creation of the local currency with foreign currency coming from the investors.

This system worked during years; companies like Ford or Carrefour invested a lot, for example. But it started to crack in 1998 when the dollar started to raise, dragging the Peso with it. Argentina had been excluded from international markets after the defection of the IMF in 2001, when the government decided to interrupt the repayment of its external debt which had reached $90 billion. After this defection the government had closed all the banks in order to avoid liquid assets crisis.

The restructuration would consist in exchanging old unpaid bonds with new ones which would represent more than the half of their value. The country needs the approval of Europe and Japan, before launching his takeover bid. A restructuration had already been rejected in 2005, but the three-thirds of creditors had approved of it. How has been perceived the news? Is it more optimistic than the first time?

Newspapers analysis:

The Financial Times seems wanting to reassure the investors. Indeed in its article entitled "Argentina plans sweetener in bonds offer" the author quotes Amado Boudou, the economy minister saying that "It would be more advantageous than the last one, which was very good', the 'last one' being the first bid in 2005. Although the newspaper reminds that Argentina in prevented by law from offering improved terms this time, it explains that better market conditions have raised expectations that the new deal could be worth 55 cents or more if acumulated interest is paid and if the country also includes a payment related to a coupon related to GDP growth issued in the 2005 to sweeten that offer. The author finishes its article with another quotation coming from the former economy minister who mastermind the 2005 bid: "I still think it's worth it for the creditors, around 40-45 cents would be a level that would still leave them with a profit".

Reuters on the 15th focuses on the fact that Argentina needs approval from Europe and Japan, but it is quite neutral, explaining the fact. Indeed according to the author the bid is being examined by the creditors who had rejected the previous offer, precising that this rejection had concerned more than $100 billion. he also explains that the country first wants to stop judicial proceedings coming from investors who want their money back. According to Reuters this offer should be accepted, which could have the effect of turning down the loan cost of the country.

The Economist is quite severe towards Argentina. The author starts its article explaining to the readers that the restructuration of $80 billion defaulted in 2005, adding that recession pushed the public finances into red and that the country is now feeling the price it had paid for excluding itself from the world financial system. Then it goes on, explaining that investors were panicking, and that the government has tried to find "unorthodox sources of revenue", with the nationalization of private pension funds. The author then explains that if the government wants to succeed it has to change its policy, which would mean to clean up the government's dodgy economic statistics and stop harassing private business. He finishes saying that there is no sign of it, and that "Argentina's debt is likely to continue to be bracketed with that of Ecuador and Venezuela as the riskiest in Latin America until the president term ends in 2011".

My opinion:

I think that it is too soon today to really see the reaction of the different newpapers concerning this news. Indeed the official plan should only be revealed at the beginning of the week, of the other countries in Europe and Japan agree. maybe the "suite" of this story in another article? To my mind it would be a good thing for Argentina to succeed in this operation. Its exclusion by the IMF did not help the country, and it has prevent Argentina from developing its international economy, and its relation with the other countries and foreign companies. Some companies still does not want to invest in Argentina anymore, and the trust is still not back. That is why the bid has to be accepted by Europe and Japan, in order to help the country to forge ahead, make the trust back and develop its international economy again.

Music of the week: a Menuet, the dance in order to seduce the countries and investors, form Bach for example...

Sources:

"Argentina plans sweetener in bonds offer", the Financial Times, 13th of April 2010

"The government tries to make peace with international capital markets", The Economist, 31st of March 2010

"Argentina could announce the details of an exchange", Reuters, 15th of April

"Argentina waiting for approval for his debt's exchange", Les Echos, 14th of April 2010

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