Guy Hands may have gotten himself in deeper than he expected when his Terra Firma Capital Partners
acquired EMI Music plc for $6.2 billion last year. But can the private equity honcho be blamed for
ushering in "the end of a cultural icon" and contributing to "the ultimate commoditization" of music, as Blaise Zerega argues in a Portfolio Tech Observer
post?
As I've noted
before, private equity firms aren't known for championing artists' interests, but are they necessarily worse than
publicly traded music labels? Many observers
agree that trimming the fat and reducing executive compensation would be a positive step for majors, as would
bringing in innovators schooled in drawing revenue out of free services and who understand that the music industry's future must extend beyond selling records.
Zerega opines that "if you cut off the spring, the lake will go dry." Yet others
think EMI might do better to abandon new talent and focus on its catalog and publishing businesses, applying an aggressive digital strategy to a Rhino-like roster of artists and recordings. I've long suspected that sales of catalog artists were among the worst-hit by file-sharing, so perhaps catalog-only labels are best suited to the free/ad-supported model and similar innovations. Used CDs of catalog artists are plentiful, and illegal downloading is rampant, but labels still might capitalize on repackaged compilations and subscription services. (Speaking of which, isn't paying a $14.99 flat fee for monthly access to a massive chunk of the music business the ultimate commoditization, anyway?)
Meanwhile, Jupiter Research's Mark Mulligan
explores whether EMI's low-advance/high-payoff model for current artists will succeed, concluding that emerging acts looking for new contracts are more likely to opt for bigger advances elsewhere. Mulligan also notes EMI's recent relative success in promoting
Viva La Vida (right), the new record from Coldplay. While Mulligan discusses Radiohead's departure from EMI as a failure on the label's part (not to mention one that has sparked ongoing
bitterness), he doesn't ask whether Coldplay, a top-selling band, will stick around beyond its commitment to EMI, regardless of its current level of success. Retaining successful acts can be as important as finding new ones, especially since a robust artist roster can also bring in enthusiastic new acts.
Instead, EMI may wash its hands of new artist development and focus on its past. Whether innovative models will be enough to sustain a catalog-only EMI remains unknown. There's also the little matter of whether EMI's most iconic artists, the Beatles (at least the two remaining ones) will participate in these novel strategies when they haven't even caved to Steve Jobs and put their music on iTunes yet. But EMI's experimentation could turn out to be a bellwether to the other majors rather than a death knell for the industry.
-- Paul BonanosSee Conde Nast Portfolio Tech Observer blog postSee
April 2 and
June 10 posts from Tech Confidential regarding EMI's new hires
For more see
Hypebot
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"But EMI's experimentation could turn out to be a bellwether to the other majors rather than a death knell for the industry."
But if all the labels just continually mine their catalog, how do they ever get any new talent to expand their catalog?