EMI sale ends 80 years of independence
 

Another nail in the coffin.....

EMI sale ends 80 years of independence

http://www.reuters.com/article/2011/...7AA35J20111112

(Reuters) - EMI, the London-based record label that for 80 years brought the world everyone from the Beatles and Queen to Coldplay and Katy Perry, is no longer independent.

The company was chopped up on Friday and will be sold in pieces, with Vivendi's Universal Music Group winning EMI's recorded music auction with a $1.9 billion offer. A consortium led by Japan's Sony said it won the auction for EMI's music publishing operations in a deal valued at $2.2 billion.

Both companies were victorious, coming from behind in the auction's final week after nearly five months of intense negotiations, trumping bids by rivals Warner Music Group and BMG.

For EMI owner Citigroup Inc, which took control of the record label after its previous owner, Guy Hands' buyout shop Terra Firma, defaulted on loans owed to the investment bank, the better-than-expected $4.1 billion in total deal value approaches the break-even level, something few observers thought possible.

Citigroup provided 2.6 billion pounds ($4.2 billion) of debt to Terra Firma's 2007 leveraged buyout of EMI but had to write off most of the loans as a result of the company's struggles.

Citigroup declined to comment on the matter.

WARNER WALKS, SONY RISES

Warner Music led the bidding on the recorded music side for much of the auction, while KKR-backed BMG was ahead on the song catalog side. But in a surprise move, Warner Music rescinded its bid last week after failing to agree to terms for taking over EMI's pension liabilities.

Warner's exit opened the door for Universal to return to the negotiating table after previously dropping out of the auction for the very same reason.

Under the deal's terms, Universal assumes the regulatory risk -- and getting the deal approved won't be easy -- while Citigroup retains all of EMI's roughly $600 million in pension liabilities and any potential liability from lawsuits related to Terra Firma's ownership, a source involved in the deal said.

The $1.9 billion price equates to a cash flow multiple of seven times, which is roughly in line with the 7.3 times cash flow multiple Len Blavatnik paid in his $3.3 billion deal for Warner Music in July. Cost synergies are expected to lower the cash flow multiple to 5 times, said a source.

On the publishing side, Sony lined up Blackstone Group, Abu Dhabi's Mubadala Development Co, and Raine Group as financing partners.

But what really put its offer over the top was a last-minute assist from investment bank UBS, which agreed to provide it with more than $1 billion in financing, according to two sources involved in the deal.

Billionaire music and movie mogul David Geffen also invested $50 million in mezzanine debt to help Sony finance the deal, said a third source with knowledge of the situation. Those two late investments allowed Sony to raise its offer and trump BMG.

REGULATORY RISK

Both deals are expected to attract intense regulatory scrutiny, as Universal is already the worldwide market share leader in recorded music and Sony will catapult to the No. 1 position in publishing.

The deal, if approved, would increase Universal's recorded music market share to 36 percent globally. In the U.S., the world's largest music market, the combined company would control 38 percent of the market. More concerning to regulators, however, is the fact that in some European territories Universal's market share would be in excess of 50 percent.

Though Sony will jump from fourth to first place in music publishing -- owning the rights to around 3 million songs including the iconic hit "New York, New York" and Adele's recent smash "Rolling in the Deep" -- its deal is structured in a way that would make it more palatable to regulators.

Instead of an outright purchase, Sony is only a minority partner, meaning that it won't consolidate revenue or debt from EMI on its books. Rather, it will administer the catalog, or find commercially viable ways to license EMI's songs, in return for a management fee, according to two sources.

Even so, Impala, the trade organization that represents Europe's independent music companies, issued a statement saying it will lobby for both deals to be blocked outright. Universal has already offered to sell more than $500 million in assets to appease regulators, but Impala said that wasn't enough.

Though Impala has successfully lobbied to block major music deals in the past, most notably Warner Music's attempt to buy EMI a decade ago, sources dismissed its concerns this time around.

These sources said the music industry is much weaker and more fragmented than it was a decade ago and that stronger companies are needed to help protect and promote artistic talent. They also cited the rise of powerful distributors like iTunes, Google, and Amazon, which together account for about 80 percent of music sales, as the principal price setters in today's market.

Indeed, the fact that Universal agreed to assume the deal's regulatory risk, which would require it to find another buyer and absorb any losses if the deal is rejected, suggests that it believes it will secure approval, sources said.

REBUILDING EMI

Even before Terra Firma bought EMI, the company had been so poorly managed that its initials were derisively said to mean "Every Mistake Imaginable."

But Guy Hands' stewardship drove EMI further into the ground. Hands, an investor known for turning around bars and gas stations, immediately alienated artists and executives alike with brash proclamations that they knew little about running a business. He slashed budgets, cut staff, and upset cultural sensitivities. Radiohead, Paul McCartney, Robbie Williams, Coldplay, and other artists either left the label or spoke out in protest against Hands.

"(We will) replenish and rebuild the rosters that have lacked the level of investment that frankly a business like this should have had. EMI is not a utility company," Lucian Grainge, head of Universal, told reporters on a conference call in a slap at Hands' mismanagement of EMI.

Even Mick Jagger weighed in on the deal, saying, "This is a very positive development and I particularly welcome the fact that EMI will once again be owned by people who really do have music in their blood."

BRONFMAN LOSES, BANDIER WINS

Losing EMI to Universal is a defeat for Edgar Bronfman Jr. The Warner Music chairman and scion to the Seagram's beverage fortune, has been trying to buy EMI for years, but control issues always stood in the way of a deal. After Blavatnik bought Warner Music in July, Bronfman moved into the chairman role with the sole purpose of completing his long-sought after deal for EMI.

But, according to a source close to Warner, Bronfman has no regrets about losing the deal based on the price Universal paid.

"Anyone can win an auction," this source said. "But it takes immense financial discipline to walk away from one you've been after for a while because the economics didn't make sense."

On the publishing side, the deal reunites Sony's Martin Bandier with the asset he helped build into a powerhouse during his 18 years at EMI. Bandier was eased out of EMI in 2007 and he joined Sony that same year with ambitions to eventually buy the division he led for nearly two decades.

The publishing win is also a validation for Sony CEO Howard Stringer. Stringer, who has been criticized for allowing Sony to lose its leadership position in consumer electronics and other areas, in 2005 made a commitment to the company's music unit, particularly its publishing unit. The EMI deal represents the unit's fourth deal in six years, increasing its value from around $500 million to more than several billion dollars.

An unrelated but totally related piece of journalism:

http://www.slate.com/articles/arts/c...stations_.html

We Won’t Rock You
The sad, unwarranted decline of rock music on FM radio.


I was 24 when I first lost my job as a radio DJ. I was 30 when it happened again. In both cases, my employers changed the stations’ formats, abandoning “alternative rock” for gospel (at Philadelphia’s Y100) and news (at Q101 in Chicago). Just this year, another Philadelphia station, WYSP, as well as New York’s WRXP and WVRX in Washington, D.C., have shifted from rock music to talk radio formats. This is just the most recent round of deaths—over the last few years, major rock stations like New York’s K-Rock, Indie 103.1 in Los Angeles, and WBCN in Boston have gone silent. These stations haven’t been disappearing because the format’s a money loser. It’s because a handful of executives have decided that rock radio doesn’t belong on the FM dial.

In February of 2004, I moved to Philadelphia to host the night show at Y100. I was incredibly excited about being on the air in such a big city. During each five-hour show, I wrote “Weekend Update”-esque zingers about music and entertainment news and counted down the day’s most-requested songs. I had just fallen in love with the band Muse, and watching them at a private show for our listeners was one of my favorite Y100 moments. But about a year after I arrived, I walked into our weekly DJ meeting and found the station in chaos. We were told that Y100 was going off the air immediately, and our services would no longer be needed. I thought I’d never get such a cool opportunity again.

Thankfully, I was wrong. Emmis Communications owned Chicago’s Q101 when I started my new gig as a midday host in 2005. At the time, the station had responded to the iPod’s popularity by using the phrase “on shuffle”—you never knew which random musical gem might pop up after Nirvana, Pearl Jam, or Foo Fighters. We supported local bands and those with local roots, like Rise Against, Fall Out Boy, Chevelle, and Smashing Pumpkins. And to the chagrin of many “alternative” fans, we played Metallica.

I’m actually not a fan of the alternative label. It’s limiting because it’s subjective: One listener’s alternative is another’s mainstream. I just knew that Q101 played music that I loved when I was growing up, and that made it fun to go to work. I’d walk into the studio excited to play a request or crack a joke that made someone’s workday a little better. My enthusiasm caught the eye of Chicago Magazine, which named me Best Radio DJ in 2008, praising my “playful riffs on topics breathtaking for their sheer randomness.” I loved my job, and my listeners—eventually—grew to love me.

Behind the scenes, though, the station’s parent company was facing financial struggles. Emmis, a publicly traded company boasting more than 30 media properties, limped through the recession and a failed attempt to take the company private. With more than $300 million in long-term debt and its stock valued at around $1 per share, CEO Jeff Smulyan decided to sell off three of Emmis’ radio stations: WRXP in New York, and The Loop and Q101 in Chicago. A few hours after the sale went through, we learned that both Q101 and WRXP would be shifting to all-news formats.

The man who decided that alternative rock radio was over in Chicago was Randy Michaels. Michaels, who resigned from his executive position at the Chicago Tribune after revelations of inappropriate and loutish behavior in 2010, made his triumphant return to media moguldom by buying my station. “My favorite format has always been spoken radio,” Michaels said in the July 31 press release announcing the launch of Chicago’s FM News 101.1. “I’ve long had a nostalgic love affair with the big AM stations known for the format, and today—as music moves to the iPod—it’s time for spoken word to move to FM.”

This isn’t the first time that one man’s actions have dealt a blow to rock radio. Howard Stern’s hugely popular morning show debuted on New York’s K-Rock in 1985 and was ultimately syndicated on dozens of rock stations. When Stern took his talents to satellite radio in 2006, K-Rock changed to an all-talk format called Free FM, with disastrous results. Most critics blamed the plunging ratings on Stern’s departure, but I’m convinced that the sudden, drastic format change sealed the station’s demise. I wonder what might have happened if K-Rock’s programmers, or those at WBCN and Indie 103.1, had been patient and given rock music a chance. (Consider that multimedia giant Clear Channel, which owns 850 American radio stations, launched a successful alternative rock station in Philadelphia two years after the death of Y100.)

Though the rise of satellite radio was supposed to prophesy the death of AM and FM, that’s not anywhere close to happening. Even so, Sirius/XM is unquestionably prying ears away from terrestrial radio. So are iPods; music-sharing services like Pandora and Spotify, which appeal to fans with instant access to millions of songs; social media outlets like Facebook and Twitter that provide constant streams of personalized content; and all the other entertainment options in this era of 1,000 cable channels and 24/7 connectivity.

An FM radio station, by comparison, lacks customization and can’t be heard “on demand.” But I don’t think music is ready to vacate the airwaves, or that someone who acknowledges a bias toward another format should be the arbiter of that decision.

FM radio doesn’t have the buzz of more recently minted technology, but that doesn’t mean it lacks listeners. The Chicagoland area is the country’s third-largest media market and has an audience of more than 7 million people. According to Arbitron, the research firm responsible for radio ratings, Q101 had roughly 1.2 million different listeners during its final weeks on the air. They weren’t all listening at once, and they wouldn’t all say that Q101 was their favorite radio station. They did, however, all make a choice to tune in. It’s too early to know if FM News 101.1 will match the size of that audience: Michaels’ Merlin Media LLC is conjuring new stations from scratch, unlike other radio conglomerates that have decided to simulcast established AM stations on crisper FM frequencies. Currently, Arbitron is reporting that 1 million fewer people are tuning their dials to 101.1 than when I was on the air. When I look at those numbers, I wonder how many of those missing million listeners remember their old friend Q101 when they turn on their iPods.

Curiosity can make a listener tune in to a radio station. Loyalty will make him stay, and loyalty must be earned. Making that kind of connection isn’t easy, and it takes patience. It helped that I worked for a company that trusted me to host a request hour and didn’t require me to pre-record shows for the weekend or for stations in other cities. Recording a show to sound live or local when it’s neither makes a DJ sound like the great and powerful Oz—a disembodied voice behind a curtain, not to be trusted. That practice, known as voice-tracking, is a way to cut costs by consolidating stations into regional clusters with a minimal number of employees. The industry started moving in that direction in the late 1990s at the behest of Clear Channel, specifically the head of Clear Channel’s radio division ... Randy Michaels.

It would be easy for me to resent Michaels, but radio is a business. He wanted to maximize his company’s profits in a volatile, vulnerable industry, and he met that goal. Consolidation made financial sense, even if it sacrificed the medium’s humanity.

Michaels’ faith in FM news is more subjective. CD sales have fallen sharply with the rise of digital downloads, and there are few alternative rock artists topping the iTunes charts. It’s tempting to conclude that tech-savvy consumers don’t care about hearing new rock music on the radio. If so, the absence of oldies, classic rock, and Latin music on those iTunes charts would imply that those formats aren’t financially successful on FM radio either ... but they are.

What I know from my years as a DJ is that listeners know what they like when they hear it. Q101 fans reached out en masse during our last days, sharing their memories of the station’s almost 20-year run. Chicago natives who’d moved away for jobs, school, or military service listened via Q101.com and sent us heartfelt emails and texts. Even now, I get choked up reading the hundreds of comments on my old Facebook page: “I feel like I've lost my best friend.” “You have no idea how much we'll all miss you guys.” “A big piece of my generation's life just died.” Then, there’s this: “Sure, the iPod can play music, but nothing can replace the personality that you brought to the station.”

Once we knew that the end was near, Q101's programming department let the DJs pick their own music. I "dusted off" songs I hadn't played in years, like "Little Black Backpack" by Stroke 9, The Cure's "Lullaby," and "Song for the Dumped" by Ben Folds Five. I played newer artists I've grown to love: Mumford and Sons, Foster the People, and naturally, Muse. I allowed myself to be nostalgic, emotional, and honest.

Those last shows were the best of my career. Passion isn’t quantifiable like ratings or revenue, but I’m proud that Q101 inspired it in our listeners, no matter how many we had. Technology will change; the need to connect with each other through stories and songs won't. When it comes to rock radio, I don’t think the preferences of a few should affect the interests of so many.

Leave it to corrupt corp radio.Which indeed ruin radio like Walmart and Home Depot did to the Ma-Pa hardware stores.Deregulating the FCC on radio and tv stations ownership quotas was a big mistake.The 1996 telecom act was a part of the problem.Including part of this so-called awesome useless digital tv transition we did in 2009 which is another whole topic.As I monitor the radio broadcast forums.We will see a changes on the FM dial with more FM news and sports popping up around the country.This means loss of rock formated and other format stations with crappy ratings numbers in cities around the usa. Leave it to Clear Channel,Emmis, CBS radio and Merlin Media to just name a few rule the radio airwaves.In
order for rockers including our Stevie got to jump gender tracks in order to get on the charts.

Clear Channel is partnered with Live Nation which is partnered with Stevie so if you don't hear her on Clear Channel stations it might be because the songs aren't good enough for their listening audience.

Please - that's bull****. You don't hear her on Clear Channel stations because Warner doesn't pay them a kickback to play her songs and real DJs don't exist anymore.

Money talks. Money is all that matters these days, in any industry.

Money is more valuble than the things money buys.

Truer words were never written. It's not just the music industry. Every business is so competitive now, that pinching every penny, out of every possible pocket, is the new business model.

And really, as far as most business goes now, the internets are really what killed it. Why buy a song when I can steal it for free? Why buy that TV at a local store, when I can search every major retailer online, and find the absolute cheapest deal, while sitting on my couch?
I'm rambling now, but really, the internets changed the world....

Stevie Nicks' songs are not going to bring in money from the advertisements on commercials that are geared to the teenage market. The average teen in fact has never even heard of him.:p

Agreed completely - but that doesn't mean the songs aren't any good. :xoxo:

I agree.Your right .

I agree. Stevie has mentioned in alot of interviews about internet pirates.
That explains why one reason she's anti-computer.

Yes .The internet has changes the ways that people listen to music.

Yeah, but it's not going to change. My friend and I are into country, and we make each other a copy, of anything new we buy. So it's more than just downloading...

Stevie keeping her head in the sand, doesn't effectively do ANYthing, other than limit her own life....

Think of the social life she could have, if she'd only start Facebooking!:mad:







;):D

I've done that to. The copying thing has been going on for ages. Back in the 50's and 60's we had reel to reel tape recorders. In the 70's and 80's we had cassette and 8 track recorders.The late 1990's CD burners popped up in computers along with Napster,WinMX and other MP3 P to P sites. Also recording of the radio . Which I've been doing since 1975 when FM self titled lp was released.

After watching tonights American Music Awards.Who want to buy a new cd or download. I'm now catching on with the new beat of music. One winner .I cant think who she was that mentioned "Thanks EMI" with a big smile.