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Another big revamp at EMI while its owners prepare to fight their bank in court
By CMU Editorial | Published on Wednesday 8 September 2010
You know what EMI really needs just now? Another big restructure, that’s what. I mean clearly, it’s not had enough of them in recent years, has it?
Yes people, as Terra Firma and Citigroup’s out of court negotiations regarding their dispute over the latter’s advice to the former during their big EMI acquisition in 2007 officially collapsed yesterday, back at EMI central top man Roger Fax-machine put on probably the finest trilby hat I’ve ever seen and sent out a memo to staff outlining his grand plan to rescue the flagging music major.
As much previously reported, Faxon, who previously headed up the more successful of EMI’s two divisions – music publishing – was recently promoted to a new chief role overseeing the whole of the music firm, including its record labels. The move was widely seen as an act of desperation on the part of owners Terra Firma, their previous recordings boss Elio Leoni-Sceti having been pushed overboard with £1.5 million in his pocket (according to the Daily Mail) back in March. His temporary replacement, Charlie Allen, previously a periphery advisor to EMI and prior to that best known for running ITV into the ground, hadn’t really impressed anyone.
That said, while Faxon’s promotion seemed rushed, it wasn’t actually that bad an idea. Popular within the company and the wider music industry, many an observer inside and outside the major noted that “if anyone can rescue EMI, the Fax man can”. Well, they probably didn’t call him ‘the Fax man’. Others – well, me anyway – also pointed out that in an age where the recordings business is becoming more about licensing than selling plastic disks, it makes sense for record companies and publishing companies in common ownership to work more closely together, music publishers being the licensing experts.
Since taking on his new role in June, Faxon has been busy writing a brand new business plan for the major, one that will capitalise on the recent mainly catalogue-fuelled growth in EMI’s recordings business, while convincing potentially lucrative new talent to sign up to the major, and, perhaps most importantly, reassuring Terra Firma’s investors that they should continue to support the music company. Investor support is important because EMI continues to need cash bails outs in order to meet the tough covenants tied to the music firm’s multi-billion pound loan from Citigroup, the loan used by Terra Firma to buy the music firm in the first place.
According to Billboard, Faxon’s plan – as outlined in the aforementioned memo – undoes some of the previous restructuring instigated by Terra Firma twonks after the equity group’s initial takeover, though it would be too easy to see the new chief’s proposals as simply being a return to the old ways, it’s more a mixture of the old and the new.
The so called ‘matrix’ structure and double boss system is out. Rather, the all new (again) EMI Group will be structured (again) around three regional divisions – North America, Latin America and the rest of the world. Faxon himself will oversee the former, though working hand in hand with Colin Finkelstein, currently President of that region, who will now have the title of COO for that division. Nestor Casonu will become CEO of Latin America, while David Kassler will have responsibility for the everything else division, which will include Europe. There will still be some global units which will provide services to the regional divisions. These will cover finance, legal, technology, HR, digital business development and artist relations.
The big post-Terra Firma innovation that will stay in place is that in each territory EMI’s recordings business will consist of one team which releases music under a plethora of label names – rather than having separate teams for EMI Records, Parlophone Records and Virgin Records (or different but similar outside the UK), as had been the case pre-2007.
The plan doesn’t seem to mention any serious integration of EMI’s recordings and publishing teams, which would probably have been too radical a move at this time, but which may well be a clever development down the line. Though, to confirm to those in EMI Recordings that they have, in essence, been taken over by EMI Publishing, Faxon has elevated his COO from publishing, Leo Corbett, with him to a group level role.
But more interesting than all of this are the executive departures that will occur as part of this revamp. While Faxon may not be dispensing with all of the structural innovations put in place by Terra Firma, most of the star name execs hired by the equity group and the aforementioned Leoni-Sceti are for the door. Ronn Werre, currently COO of North America, Billy Mann, currently chief new music and artist relations guy outside of the US and UK and Nick Gatfield, EMI’s big post-Terra Firma A&R hire, are all out.
But the major’s post-2007 mantra – “were a service company not a product company” – does remain. Look, here’s Faxon saying so: “EMI Music today still acts like a product company – we gear ourselves up for product launches, and we get ourselves worked up about market share and units shipped and so on. But the market has moved on, we need to understand that we are not a product company at all – we have to be a service company, and one that is obsessive about discovering great music (or rediscovering great music from our catalogue) and connecting it with an audience through every route available to us”.
As a sort of mission statement that’s probably as good as you’ll get, but whether another big revamp to hierarchy is what is needed to achieve that aim remains to be seen. Can EMI Music’s recent growth be maintained? Very possibly. Will artist managers continue do all important new talent deals with the major? Hmm, Mann and Gatfield’s departure will be a surprise for some. And will Terra Firma’s investors be convinced enough to keep bailing the company out? Terra Firma insists “yes”, but I’m going with a “time will tell”.
Talking of Terra Firma, with those previously reported last minute pre-court negotiations between them and Citigroup having achieved little (as expected) both sides moved into trial mode yesterday. As you know, Terra Firma is suing Citigroup over the advice the bank provided ahead of their EMI purchase.
Both sides filed papers with the New York court yesterday. The bankers want the case thrown out without trial, the equity group, obviously, do not. A judge is expected to consider Citigroup’s quick dismissal argument later this week. Assuming he doesn’t rule in the bank’s favour, the case is due to come to court proper next month.
Talking of legalities, we must stress, for legal reasons you understand, that Roger Faxon did not wear a trilby hat while sending out his memo yesterday. Though he’s dapper guy, I bet he’d have looked great if he had.
