CMU Weekly Editor's Letter

Editor’s Letter – Friday 11 Nov 2011

By | Published on Friday 11 November 2011

Waiting’s a funny thing, isn’t it? I spent most of today waiting for the sale of EMI’s recordings division to be announced, trying to second guess what time an announcement would arrive.

Midday, as Wall Street wakes up and the first US newswires go out (ie 7am there)? Nope, we were pretty sure it was Universal Music Group getting the EMI labels, and that it would be them making the announcement, and its parent company Vivendi isn’t listed in New York so Wall Street’s not relevant. But would it come from UMG’s New York office? In which case nothing was likely to be said before 9am their time, giving me time to go and grab lunch. But then wouldn’t UMG’s owner Vivendi actually make the announcement, and it’s in Paris an hour ahead of us. I wonder what time French people go for lunch.

The day was speeding by and nothing was happening. Was the press release actually going to come from UMG CEO Lucian Grainge’s HQ in LA? In which case, what time would I have to stick around til? But not to worry, because just before 3.30pm UK time Vivendi HQ did the honours, telling us that Universal Music Group had agreed to purchase EMI Music for £1.2 billion.

Phones rang, statuses were updated, a story was written and posted, suddenly the CMU office was alive with activity, where previously all had been calm. It’s quite exciting when that happens. Now I’m sat here writing this in the aftermath.

Although the sale of its publishing division has still not been formally announced, this nonetheless confirms that EMI is definitely being split up, and the music world’s fourth major label is set to become no label at all. Its recordings will be absorbed into Universal’s catalogue, and most likely Sony/ATV will grab the publishing division – insiders say that’s a done deal, though our sources tell us the formal announcement may now not come until next week.

Announcing the deal, UMG Chairman and CEO Lucian Grainge said: “This is an historic acquisition for UMG and an important step in preserving the legacy of EMI Music. For me, as an Englishman, EMI was the pre-eminent music company that I grew up with. Its artists and their music provided the soundtrack to my teenage years. Therefore, UMG is committed to both preserving EMI’s cultural heritage and artistic diversity and also investing in its artists and people to grow the company’s assets for the future. As a result, we will be better positioned to fully capitalise on the many new and exciting opportunities in the current marketplace, and also able to better serve our artists, songwriters and business partners, while offering fans even more choice”.

All of this, of course, depends on the deal getting through the various hurdles now facing it. Pan-European indie labels trade body IMPALA had already said it would oppose any Universal/EMI deal, and confirmed that again following Vivendi’s announcement. With Universal already the world’s biggest music company, IMPALA and others feel it absorbing EMI’s record labels will give it an unfair control of the music market.

IMPALA similarly opposed the merger of the Sony and BMG record labels back in 2004, and although it did not succeed in completely blocking the two companies from joining, it did slow down the process and force certain concessions to be made. Even more so when Universal merged its publishing division with BMG Music Publishing in 2007. UK indie label trade body AIM is also likely to react negatively to the news, and it’s expected that competition regulators will launch an investigation in the not too distant future.

However, Universal seems confident that it can get the deal approved, possibly by selling off some of its existing catalogue – it has already confirmed that it will sell off up to half a billion euros worth of “non-core assets” just to finance the takeover. Presumably, so long as it ends up with the Beatles, Coldplay, Radiohead, Pink Floyd, Beach Boys and Radiohead recordings, the company will be happy to lose whatever it takes.

Still, after all this excitement, it’s a shame that this means that EMI will all but disappear. Following the rocky years the company spent owned by equity firm Terra Firma, it emerged leaner, fitter and more forward thinking. The strategy of encouraging a closer relationship between the publishing and recording divisions was both sensible and starting to show signs of paying off. And EMI has launched other interesting initiatives in the last eighteen months, most recently an API giving app developers access to content. What will happen to all of that remains to be seen, but it seems certain that much of the work done by current CEO Roger Faxon will be sadly lost.

Meanwhile we’ll have to get used to referring to the major labels as ‘the big three’. It’s not that long ago that we were saying ‘the big five’. And some of us can remember ‘the big six’. Times are definitely changing.

In other news this week, the government announced that it will close the Channel Islands VAT loophole, which has allowed companies based in the English Channel to exploit the Low Value Consignment Relief system, which means mail-order companies based in Jersey and Guernsey (and, as it turns out, Alderney) can send goods (often CDs and DVDs) with a retail value of less than £15 (and until recently £18) back to the mainland without having to charge VAT. This automatically gave these companies an advantage of between 15% and 20% over the years, and many have blamed this in part for the closure of many of the UK’s independent record shops.

While campaigners against LVCR, such as Retailers Against VAT Avoidance Schemes, one of whose members Richard Allen recently gave an interview to CMU, have been in celebratory mood, some of those businesses based on the Channel Islands have not, one suggesting he will challenge the government’s decision in court. Meanwhile the Entertainment Retailer’s Association welcomed the decision but with some caution.

Elsewhere this week, and following the Motion Picture Association’s success in getting the courts to force BT to block access to file-sharing website Newzbin earlier this year, the BPI led a consortium of trade bodies in asking the telco to also stop its customers from accessing The Pirate Bay. BT has said it is considering its response, but may agree in order to avoid another costly legal battle and also to help gain licences for its rumoured new music service.

And, of course, on Monday, Conrad Murray was found guilty of the involuntary manslaughter of Michael Jackson. A jury decided that he had acted negligently prior to the singer’s death. He will be sentenced later this month. Though first, you can watch a Channel 4 documentary following him through the trial – it’s on 4OD now.

CMU features this week reflected, somewhat, the huge number of music award ceremonies there are going on this month. First, we spoke to Festival Awards boss James Drury, who told us about the history of his awards (which take place next week) and the challenges facing the festival industry. Then I put together a playlist featuring some of the artists nominated at the inaugural Independent Music Awards. Organised by the Association Of Independent Music, the winners were announced at a ceremony in London last night.

In his column this week, Eddy Temple-Morris took a break from rants and anecdotes about the music and radio industries to indulge his other passion, food, giving us a tour of his favourite eateries in London.

Over in the CMU Approved column, between us Aly and I selected music from garage rockers White Denim, French indie troupe FAMY, Russian producer Vagina Vangi, plus we streamed the debut solo LP from former Plans & Apologies frontman Mallard The Wonderdog, a concept album about trying to cope with being an atheist who finds himself in Heaven.

And there was more new music beyond that too, including new tracks from Speech Debelle, Lindstrøm, Field Music, Nneka, Factory Floor and MJ Hibbett, who continues the theme of indie concept albums by announcing the release of his lo-fi rock opera ‘Dinosaur Planet’.

On top of that little lot, should you want more from Team CMU, then book a slot this weekend to listen to this week’s podcast, going online soon. You’ll find discussion on the closure of that VAT loophole, the EMI sale (prior to today’s developments, as we record on Thursday), the BPI calling on BT to block access to The Pirate Bay, the RIAA’s increasing distaste for how US courts are interpreting online copyright laws, the Conrad Murray trial’s conclusion, plus the collapse of Alex James’ festival.

And that’s it. Have yourself a lovely weekend!

Andy Malt
Editor, CMU