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While the details are in flux, insiders say Morris & Co. have an intriguing business model: get hardware makers or cell carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that's essentially free. Music companies would collect the subscription fee, while hardware makers theoretically would move many more players. "Doug is doing the right thing taking on Steve Jobs," says ex-MCA Records Chairman Irving Azoff, whose Azoff Music Management Group represents the Eagles, Journey, Christina Aguilera, and others. "The artists are behind him."
Morris and Jobs were once the best of allies. When Jobs began pushing his idea for a simple-to-use download store in 2003, Morris backed him. Industry insiders say Jobs felt that Morris, unlike many other music executives, understood that they had to adapt or die. And in the years that followed, Apple and Universal moved in near lockstep.
But before long, Morris realized he and his fellow music executives had ceded too much control to Jobs. "We got rolled like a bunch of puppies," he said during a recent meeting, according to people who were there. And though Morris hasn't publicly blasted Jobs, his boss at Universal parent Vivendi is not nearly so hesitant. The split with record labels--Apple takes 29 cents of the 99 cents--"is indecent," Vivendi CEO Jean-Bernard Levy told reporters in September. "Our contracts give too good a share to Apple."...
With the Total Music service, Morris and his allies are trying to hit reset on how digital music is consumed. In essence, Morris & Co. are telling consumers that music is a utility to which they are entitled, like water or gas. Buy one of the Total Music devices, and you've got it all. Ironically, the plan takes Jobs' basic strategy-- getting people to pay a few hundred bucks for a music player but a measly 99 cents for the music that gives it value--and pushes it to its extreme. After all, the Total Music subscriber pays only for the device--and never shells out a penny for the music. "You know that it's there, and it costs something," says one tech company executive who has seen Morris' presentation. "But you never write a check for it."
EMI, “wants to cut its funding to the industry’s trade bodies, a source familiar with the situation told Reuters on Wednesday, which could deal a blow to the fight against music piracy,” says Reuters.
“The source said EMI … was looking at ways to ’substantially’ reduce the amount it pays trade groups,” says the story, going on:
The groups, the International Federation of the Phonographic Industry (IFPI), the Recording Industry Association of America (RIAA) and other national associations, represent music companies and the fight against illegal piracy.
They receive funding from the four major music groups - EMI, Warner, Sony BMG and Universal - and hundreds of small independent labels.
Hands plans to cut the marketing budget to 12 percent of projected sales, from 20 percent, but raise spending on A&R (artist and repertoire), which looks for new talent, The Sunday Telegraph said.
The Sunday Times said EMI would also ditch thousands of artists when he announces his plans on Tuesday.
He's approaching it as an investment, which is smart from a financial perspective. I'm sure he's making people nervous by admitting it's all about the almighty dollar (or pound, or euro) but at least he's being honest about it. At any rate, he seems to be in a better position to actually put changes in effect than say, Rick Rubin. I don't know if they'll be of great benefit to the artists, of course. He's probably going to save money by losing Robbie Williams alone (didn't they give him some outrageous chunk of change, like $80 million?)
FT:
Guy Hands is close to raising £200m ($391m) of fresh equity to inject into EMI as he prepares to slash more than a third of the staff in its problem-hit recorded music business.
In his first interview since completing the £3.2bn acquisition, Mr Hands dismissed fears that Terra Firma, his private equity group, could lose money on the deal, struck just before the credit squeeze began.
He accused the music industry of “burying the creative process in bureaucracy” and losing sight of its real function. “Our job is to monetise music for the artist,” he said. Instead, EMI’s network of labels had 19 managers, marketing executives and lawyers for every “A&R” talent scout.
Mr Hands rejected accusations from artists and their managers that he did not understand creative businesses, saying the challenges at EMI were no different from those he had faced in pub, train and aircraft leasing businesses. He declined to say if he would inject more capital but is thought to be close to sealing the largest co-investment round Terra Firma has raised, allowing it to hit earnings targets agreed with bankers and fund A&R investment.
How's that taste, Citigroup? Thought so. Citi, which financed Terra Firma's buyout of EMI last year, has been trying to lay off some of its $10 billion in EMI loans, but is having a hard time. No one, it seems, wants to back a struggling company in a struggling industry, particularly when the company seems unclear about where all of its money is going. FT:
The bank had tried to include those loans in a $12bn portfolio that it is planning to sell at a discount to private equity firms. However, Citigroup was forced to remove them from the package after it was unable to provide adequate financial information to potential buyers, people familiar with the matter say.
EMI is now in the midst of a radical restructuring being undertaken by Guy Hands, Terra Firma’s chief executive, that will include as many as 2,000 job cuts. Its bankers remain unclear about its future business prospects and the financial results of that overhaul, a person close to the situation said.
There is also uncertainty because EMI is reviewing the way that it accounted for merchandise shipments to retailers in late 2007, according to people familiar with the matter.
The FT story, which is both detail-laden and depressing, says EMI is specifically struggling to offload about $2.4 billion in debt, but feels OK about its chances with another $2.6 billion or so, since it's supposed be replaced with a music rights securitization deal.
Sir Mick Jagger is to lead The Rolling Stones away from Guy Hands’ EMI, ending a long association with the British record company.
The band is expected to sign up with Universal Music, and the deal is all the more valuable because the Stones will control all their releases since the 1970s, including Sticky Fingers, Exile on Main Street and Black and Blue.
Sir Mick’s decision — on the eve of his 65th birthday — follows a bidding war between all the big record labels, and is a blow to Mr Hands who failed personally to persuade him to stay.
Mr Hands acquired EMI last year for £2.1 billion through Terra Firma, the UK private equity house.
Neither company was willing to comment, but sources familiar with the situation said Terra Firma wanted Citigroup to inject up to 300 million pounds ($486.2 million) into EMI and write off about 500 million pounds' ($810.3 million) worth of debt owed by the label's recorded music subsidiary. Citi was unlikely to accept, said the sources, because it would mean writing off a hefty chunk of EMI's 2.5 billion-pound ($4.1 billion) debt pile just for the privilege of staying on as lender.
This does not mean Citi is in any hurry to force EMI into bankruptcy, however. That would mean facing the ugly truth of a realistically-valued EMI in fire-sale mode, which might then squash the bank's dreams of getting its money back. Already Terra Firma has written off half of its own 2.6 billion-euro ($3.6 billion) investment in EMI, two years after the acquisition was agreed.
LONDON (Reuters) - British private equity group Terra Firma <TERA.UL> wants to bring in outside investors to help prop up music company EMI <LNDONE.UL>, which is struggling with 2.6 billion pounds of debt, The Observer reported.
The report said pension funds, insurance companies and foreign banks had been approached by Terra Firma amid fears EMI could default on interest repayments to Citigroup Inc <C.N>, which bankrolled the buyout of the music group in 2007.
Terra Firma on Friday accused Citigroup of fraud and sued the bank for billions in damages in connection with Terra Firma's purchase of EMI, court documents filed in New York showed.
Terra Firma accuses Citigroup of inflating the price it paid for EMI by failing to reveal that the only other bidder, Cerberus Capital Management, had withdrawn hours before an auction for EMI closed.
http://www.nytimes.com/reuters/2009/12/13/business/business-uk-terra-firma-emi.html?_r=1
omg man, give it up already.
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