EMI's Death Slightly Exaggerated November 21, 2010 — Saw a headline last week saying that "The Music Biz Shrinks Yet Again, as Courts Close EMI." This came as no great surprise to me, as it almost happened in June. I figured that time had finally run out for Terra Firma, the investment group that bought EMI a few years ago and has been struggling ever since. So I believed it. But that's not what happened at all. Moses Avalon's Nov. 13 story is wrong. The courts have NOT closed EMI. What really happened was merely that the court decided that "claims by Terra Firma that Citigroup tricked its chairman, Guy Hands, into overpaying for EMI" didn't have legal merit. Bloomberg reports that "Hands, 51, lost the suit, which Citigroup has called a 'misguided attempt' to gain leverage" in talks about restructuring the debt Terra Firma owes to CitiGroup. Avalon got one thing right. "Ironically, a CitiBank executive said under oath that the record company made a bad deal and now they just don't want to live with it; a cruel twist because usually it's the record company telling the artist that very same thing." Yeah, that is an amusing thought, but not quite amusing as my image of bank auditors going over a record label's books and going into shock as they realized the nightmare that had to be cleaned up. So the story of EMI's death has been greatly exaggerated. They're still not dead yet. Terra Firma just lost a play to restructure the terms of the debt. This all may have something to do with EMI's decision to finally allow the complete Beatles' catalog to be sold on iTunes, which is only the first of several options still open to Terra Firma. Financial Times describes the situation as follows — "The defeat has left Guy Hands’ private equity firm with four options: Terra Firma could inject new equity to avoid breaching loan covenants when they are tested next spring; it could sell parts of the company or pawn US distribution rights to a rival; it could default and lose the company to Citigroup; or it could negotiate a settlement with the bank." Warner Music has been trying to buy EMI for a decade. This might finally set up the conditions to make such a thing happen. Unfortunately, this really isn't an improvement. The three major labels that remain Warner, Universal and Sony/BMG have already abandoned any premise of competition, so maybe the antitrust obstacles will be enough to prevent it. That seems to be wishful thinking on my part, though. If antitrust concerns were an issue, those three labels would have been prevented from several of the "joint ventures" they have entered into, like the purchase of MySpace Music. EMI didn't take part in that arrangement and, last I heard, was trying to retain some sort of distance from the other three majors, even threatening at one point during the infamous lawsuits to stop being a member of the RIAA. What seems realistic is that if EMI gets divided up between the other majors, nothing really changes in terms of music. The best option would seem to be for something unrelated to buy it up. Moses Avalon suggests Google might buy it to jump-start a new music subscription service. For music, this would be a step forward, perhaps the path to finally begin bringing the music industry into the 21st century.

The Music Biz Shrinks Yet Again, as Courts Close EMI — MusicDish.com   Citigroup Talks With Hands Said to Have Failed Over Valuation of EMI Group -- Bloomberg.com