Is it just me? Here are 10 weird things I've noticed about Universal Music Group's planned acquisition of EMI.
Not only that, Universal added $600 million (give or take) over the nearest competitive offer (from Warner Music Group.) And, agreed to pay that premium even if the deal wasn't approved.
And, we keep hearing about drastic chopping and belt-tightening inside Universal Music Group to make this happen. Which makes us think this is more about egos and marketshare than actual competitive advantage or practical business logic.
This was supposed to be about combining catalogs and creating a label powerhouse. But is that worth $600 million and endless divestitures?
And, there's a lot getting dumped. Virgin seemed like the first sacrifice, though now, it appears that UMG will sell substantial chunks of Parlophone, Mute, Chrysalis, and lots of others to secure the deal. That's part of the latest proposal to appease European regulators, who are wary of an overly powerful recording catalog. Which means, Universal Music will probably lose gems like Coldplay, David Guetta, and Pink Floyd, just to get the deal done.
Looks like extremely narrow self interests rule when it comes to monstrous label mega-mergers. Maybe that's why Warner Music Group ex-chairman Edgar Bronfman, Jr. sat in front of a Congressional Committee last month to discourage the purchase.
This one's easy: a denied deal would allow WMG owner Len Blavatnik to buy the distressed EMI for a 'reduced' $1.3 billion, while saddling UMG with a very expensive bag.
In fact, a majority of IMPALA members voted in favor of the merger (though the group as a whole technically voted against it). Which means that indies will scream bloody outrage... until you throw them a scrappy bone. First to go rogue was Patrick Zelnik, who suddenly had a chance to helm a 'divested' Virgin Records.
Who knows if that happens, though lots of other labels and catalogs are also on the table, with indies reportedly getting first dibs, discounts, and even discretionary development cash.
(and before they scream bloody outrage at us, yes, Merlin and AIM are still publicly against this deal...)
The music industry is fun and all, but shouldn't European leaders be focused on economic meltdowns, insolvencies, bailouts, and other scary things?
The music industry is fun and all, but shouldn't American leaders be focused on economic meltdowns, insolvencies, bailouts, and other scary things?
That is, even without conglomerating with EMI! That was the biggest realization to come out of recent Congressional hearings. Because overnight, UMG can decide to withhold its content, or sue a startup into oblivion.
You don't need a Congressional panel to see this, though that only underscored the point. Just look at the top charts across iTunes, Spotify, radio stations, YouTube, and even BitTorrent and P2P channels. It's all major label stuff!
Which brings us back to (1). At latest count, sources to Digital Music News pointed us to 25 different UMG executives with seven-figure salaries, though we've also heard the winnowing is underway.
And EMI keeps melting, with Faxon expected to make quite a golden parachute. But is it 2012, or 2002 here?
(written while listening to Com Truise)
FUNKMATA Friday, July 27, 2012
Thank goodness someone has seen the writing on the wall.
@mattadownes Friday, July 27, 2012
Who are the geniuses that approved the $600m regulatory approval gamble?
Right on Beverly Friday, July 27, 2012
A letter from the inside...
From: Faxon, Roger
Sent: Friday, July 27, 2012 8:35 AM?
To: EMI Staff
Subject: EMI Music - UPDATE
As I am sure you will have read, the European Commission has raised formal objections about the effect of bringing EMI and Universal together, and the two parties have since been working to find a potential remedy. As you can imagine, there are often significant differences in view between the regulators and the company applying for approval, but in the end, the two need to find a way of bridging those differences so that the merger can go forward.
In the last few days, Universal has identified a possible set of solutions that it believes should resolve the Commission's concerns. I emphasize the word 'possible' because before a resolution can be finalized the regulator will seek the input of a variety of third parties. The market testing of a proposed set of remedies is designed to help the regulator understand the implications of the proposed package, before they make a final determination. So, following the feedback from the market, there is obviously the chance that the proposed set of remedies will change before they become final.
The EU regulators will soon be putting the remedy package proposed by Universal into that market testing. Inevitably much of what is in that package will leak to the press, and that has already started to happen. As such, I wanted to make sure that you heard what is really going on directly from me.
Here is what is included in the package of proposed divestments:
- In the UK, an entity composed of the rosters and catalogues of Parlophone (excluding the Beatles, both as a group and individually), Mute, Chrysalis (excluding the Robbie Williams catalogue) and Ensign would be sold. Included in that disposal would also be the Pink Floyd catalogue and the recently concluded new deal with David Guetta, along with his catalogue. Note that these disposals only relate to exploitation of this repertoire within the EEA.
- EMI Classics and Virgin Classics would also be divested in the EEA.
- EMI's share of the NOW brand and compilation business in the EEA would also be sold. However Universal would keep its share and participation in the Now compilation venture.
- The proposal also includes the divestment of a number of EMI's operating businesses in Continental Europe. Those local operating companies are EMI France, EMI Belgium, EMI Czech Republic, EMI Poland, EMI Portugal, EMI Sweden and EMI Norway.
- Universal is also proposing to divest some its own businesses, principal among which are Sanctuary, Co-Op, and UMG Greece plus several European jazz labels.
- They would also commit to terminate or not to bid for a number of high-profile European licenses for major Anglo-American and domestic repertoire, namely Disney Records, Hollywood Records, Ministry of Sound, and Restos du Coeur in France.
Clearly it's an understatement to say that there are huge implications here for EMI, our staff and most especially, our artists. You will have hundreds of questions, as do we. As this is still a proposal right now, it is difficult for us to answer any of them right now, but over the coming days and weeks, we will be working very hard to address as many of them as possible. We have a lot of time to work through how all of this is going to unfold and how it will affect each of you. So as soon as we are able, we will be working with you to achieve just that.
So what happens next? Obviously the remedy proposal needs to proceed through market testing. That testing should not take long, but a final decision by the EU College of Commissioners will not take place until the second half of September. Of course, regulatory reviews elsewhere - particularly in places such as the United States and Australia - will also need to be completed, as well as a number of practical logistics.
With all that in mind, it's possible that with a wind behind our backs we could close the sale and EMI could pass to UMG as early as the end of September. However I think it is more realistic to plan for a close at the end of October. It is only at that point that any of the disposals could be put up for sale - and even then it will take some additional time for the sale to be completed of any businesses that are being divested. So as I say, we have some considerable time to make plans that take into account the needs of our artists, and in the meantime we will be working as hard as ever to deliver the successful outcomes that our artists so richly deserve.
All of this is a lot to digest, I know. While there is not much more that any of us can say right now, I am sure that you will want to talk to senior management here at EMI, and we will be reaching out directly to as many of you as possible over the coming days and weeks. As soon as I have any more concrete news for you, rest assured that I will contact you all right away.
Yves Villeneuve Sunday, July 29, 2012
Personally, I am rooting for this merger.
I am strongly guessing Bronfman, Cohen and Blatvanik stole Warner from its shareholders.
What was their plan? Intentionally incur a decade of losses at Warner thereby reducing the stock price for easy aquisition, buy EMI and cut costs at both companies after the aquisitions to effortlessly pay off debt resulting from Warner's intentional decade of losses.
Frustrated reader Monday, July 30, 2012
Please don't become too much of a tabloid with an over-the-top headline. This is normally a quality publication, but to state that WMG hates the deal is far from a "weird thing"! Of course they're against it, don't tell me you've only just realized that.
paul Monday, July 30, 2012
I hear you, though WMG's position is just so obviously driven by a very narrow self-interest, maybe I'm just naive. After all, THEY want to buy EMI by scuttling this deal, simple as that. Then again, you're right, appealing to Congress based on such a transparent game is probably not that weird.
But I really find the contrast to indies to be the most eye-popping. This is a group that really hasn't moved in unison at all, and has shown just as much narrow interest as WMG.
Hope that lowers your frustration a bit?
Dooder Monday, July 30, 2012
Honestly, too much attenton to this is retarded. Major labels are a sinking ship and a monstrous mereger wont save their souls. I hope it gets approved so people see it wont make a huge difference at all. The competition amongst them is between the majors, the can go f!$* themsleves!
joanned Monday, July 30, 2012
The Jackyl Monday, July 30, 2012
Resnikoff, your taste in music blows! Yeah, I'm the guy that splashed ice water in your face at Hotel Cafe in the parking lot!