Rotten end for EMI as Hands closes in

[busybeeburns]

It has been, as the Beatles wrote, a long and winding road. But, surely this time the music has stopped for EMI, the record company that signed the Fab Four.

 

For a decade, the group dubbed Every Mistake Imaginable by City analysts, has been sidling up to rivals with a doe-eyed I Want to Hold Your Hand expression. Now it has found Hands to hold in the shape of Guy, the Terra Firma boss who doubles up as the owner of Britain's biggest collection of karaoke songs. Even if his £2.4bn offer fails to whisk EMI off the dance floor, its days as a singleton look numbered.

 

Mr Hands is offering 265p per share and, for keen followers of EMI, the price says much about the music major's fall from grace. Only two years after EMI was spun out of TV rentals group Thorn EMI in 1996, Edgar Bronfman, then running Seagram's Universal music business, came knocking. EMI was then by Sir Colin Southgate at the time and the pair failed to hit it off.

 

In 2000 it was the turn of the newly created AOL Time Warner to cuddle up to EMI, now being run by Eric Nicoli.

 

Those talks were at the height of the dotcom boom, but the mooted deal was at around 800p a share. If Mr Nicoli had pulled it off, he could have delivered his Baby You're a Rich Man speech to investors and left as a hero. Instead, he has delivered a Hard Day's Night, interspersed with failed attempts to get hitched to Germany's BMG and a comical routine involving Warner Music, where Mr Bronfman has now pitched up.

 

Mr Nicoli and Mr Bronfman have spent much of their time bidding for each other's companies, in an attempt perhaps to steal the limelight from their acts - EMI is home to Robbie Williams and Coldplay, Warner boasts Madonna and the Red Hot Chili Peppers.

 

Egos and the regulators have got in the way, but lately Mr Bronfman had been calling the tune. EMI rejected a 320p-a-share proposal a year ago from Warner, claiming it undervalued the group and had too many competition strings attached.

 

Only 10 weeks ago, EMI rejected a revised offer from Warner, pitched at a lowly 260p-a-share, reflecting the company's latest two profits warnings. Now he's recommended just 5p-a-share more.

 

EMI's sliding value is due to many things, not least the ending of music buyers' love affair with the CD, but one stands out: bad management. And, since January's ousting of former music chief Alain Levy and music vice-chairman David Munns, Mr Nicoli can hardly blame anyone else.

 

EMI has two divisions. It owns a highly prized music publishing wing, with songs like Bohemian Rhapsody and I Heard It Through the Grapevine - which extracts royalties from airtime plays of old hits and makes £1 of profit for every £4 sales.

 

But it also has a recorded music arm, where the margins are three times as bad and getting worse. After a blockbuster 2005, boosted by massive albums from Coldplay and Gorillaz, the recorded music arm seems to have run out of hits.

 

In Mr Nicoli's defence, he chose a bad time to opt for a rock 'n' roll lifestyle. Since 2001, the European music market has seen its retail value slip by almost a third to £5bn. But this has been exacerbated by EMI's tardiness in reacting to the huge changes in the industry.

 

Lorna Tilbian, of Numis Securities, said: "They misjudged the impact of digital downloads. They saw their business as all about content, not distribution."

 

Belatedly, EMI has got it, as shown by the recent deal with Apple to sell digital music through the iTunes store without the copyright restrictions that critics say have held back the legal downloads market - something would-be suitor Warner has refused to do.

 

Some saw this move as a poison pill for Warner, though a bigger deterrent for all suitors was Mr Nicoli's plans to gear up the music publishing wing and securitise it, using similar techniques to those masterminded by Mr Hands a decade ago. Terra Firma moved before EMI got the chance. Or looking at it a different way, perhaps EMI's mooted securitisation was a deliberate ploy to flush out private equity bidders.

 

Whatever, Mr Hands must be braced for a counterbid from Warner, as well as moves from other financial buyers recently linked to EMI, including One Equity Partners, Fortress and Cerberus. "I'm sure we will get other bids," said Ms Tilbian. "This is the beginning of the end for EMI."

 

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/22/ccemi22.xml

[Black Rose]

So any acts who are taking forever to record albums or had an album of poor sales might soon find themselves needing a record label.

[yamfox]

http://news.bbc.co.uk/2/hi/business/6677875.stm

[berrywoman]

:o zoinks!