EMI WILL NOT DIE, SAYS CEO: Calls Journalists “Idiots,” For Saying Otherwise
According to CEO Roger Faxon, EMI is having no problem meeting its financial obligations and plans to be around for quite some time.
Moses Avalon
It must be tough to be Roger Faxon this week. On Monday morning he wakes up to find that not only has his sugar daddy, Terra Firma, lost in court to its lender Citigroup, but many bloggers and journalist (me included) had written an epitaph to EMI, the company he runs, essentially throwing dirt on the grave of the major label before the coroner’s report is signed. Tired of pulling employees off the ledge of the building, on Wednesday Faxon fired back.
In an odd move, rather than call a press conference to publicly diffuse all the negative speculations, which would have opened his comments to journalist’s scrutiny, Faxon opted for a private memo to EMI staff. In essence, calling the press irresponsible and implying that the blogosphere should bugger off.
But Roger is no dummy. He had to know that his “private” memo would be leaked. I mean, he had to know that, right? He’s like, a CEO in the entertainment industry, n’stuff, right? And so it was, leaked that is, to Billboard, who published it for all the bloggers and journalists to whom he’s giving the finger to see and take their shots.
So, here’s mine.
Roger, you are not living in reality. Your precious EMI in all likelihood is about to be foreclosed upon. This is not news I am relishing. EMI has always been my favorite of the majors as far as artists rights are concerned. But you have to get your head in the game, dude.
Guy Hands has a few short months to come up an amount of money that would be hard to raise even in a good economy. Writing cute retorts to rumors of “Chapter 11” like, “EMI is a British company and there’s no such thing as Chapter 11 in the UK,” makes you sound like a complete douche-bag. So what if a journalist got a nugget of nomenclature wrong (thank God it was not me). The point stands. EMI is in serious trouble. If Terra Firma don’t come up with more cash than the gross national product of some small countries, you’ll be calling Hollywood Treasures to auction off the toilet seat used by Paul McCartney.
Faxon’s cavalier attitude is part of the very reason EMI is in trouble: like many multi-national conglomerates these days, they continue to have a sort of pathological optimism about their fate, or their inability to fail, so this memo of his is not to be unexpected. This week Faxon no doubt navigated through a work environment rife with panicked employees who would not have been able to function without some reassurance from the ship’s captain. He did his job. He gave it to them. Unfortunately he’s the captain of the Titanic. And I think, despite the bravado in his memo, he knows it.
Looking closely at Faxon’s missive we can learn quite a bit. Not from what he mentions, but rather what he does not mention. Aside from the “Chapter 11” thing, he tries to dispel the rumor that the company’s assets would not be broken apart if Citi took control. Calling the notion “idiotic” (I think that one was leveled at me personally), Faxon states that this would be foolish (but not impossible) because breaking off assets to pay back debt would “make EMI weaker.”
Uh… duh. That’s the way companies rise and fall: by selling off assets to pay back debt. Has Roger never heard of the concept of M&A, does that not exist in the UK? Or is he presuming that EMI employees are too flummoxed to understand movies like Wall Street and Working Girl?
In reality EMI will have little control over how Citi deals with their assets should they choose to foreclose. Faxon’s words, accurate as they might be, have no place in a paradigm where entities outside of the music space might view EMI assets in ways that are not in the tradition of selling music masters. Loss leader, for example.
Without realizing it, Faxon validated my unique speculation earlier this week about Silicon Valley’s role in this episode. In trying to defuse the notion that EMI would be bought out by another major label, Faxon waxed on about how none of the other Big Three are in a financial position to do that. This agreed with my piece from last week, wherein I speculate that a tech giant like Google is the more likely candidate for certain EMI assets. Faxon’s memo conveniently ignored this component of my theory.
I can only wonder why. I’m pretty sure he read it since many EMI staff are on this mailing list.
Roger, we’ve never met, but I feel your pain and I wish you luck this coming week. Can’t wait to read the next private internal letter: the one where you ask your artists to buy EMI stock to keep it afloat.
Don’t discount that a rough draft of that memo isn’t in Roger’s mind. Somewhere, I’ll bet, a lawyer is looking into it.
Mo out.
PS: BTW– For those on this list who are US EMI employees, my guess is that your jobs are safe for a while. Since the name “EMI” itself is probably the best asset the company has, any buyers would (if history is consistent) keep most of the below-the-line (read, anything below Sr. VP) existing infrastructure.
Have a thought on this? Don’t send me an email. Post your comments below.
Read Roger’s entire memo here.
17 responses to “EMI WILL NOT DIE, SAYS CEO: Calls Journalists “Idiots,” For Saying Otherwise”
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Once again, excellent. You nailed it.
And, Moses, let me extend your thoughts, and give you my opinion of the next bit of the movie, from a cynical – or pragmatic – viewpoint: There is a dialogue going on in London right now, and it’s between only two parties, Terra Firma and Citi. It’s the last act for the trial losers, Guy Hands (and by extension) Roger Faxon. They are going offstage now, their scenes are over. They are in the eternal woodshed now of this business, punished for Guy’s last action, for Guy’s rebellion towards their overlords. EMI is now
taking the orders they wouldn’t take before.
So, who needs the image of EMI to be strong and defended? Not Guy any more. Citi does. And they have told Hands that: let the world know there’s nothing amiss, and please do it slyly. Who needs this surreal Faxon memo? Citi does. Even more than Hands who is on the ropes, and who is, effectively, out of the equations, and maybe not just re EMI, in his larger business world as well.
So this blithe “private memo” is not a form of whistling by the graveyard, it’s too fascinatingly stupid for that analysis: it’s a calculated message to the press and the world and the other labels, a hype, implying that “we’ll never sell”, “we’re in great shape” and “we’re a strong company still, no damage from the NYC trial here!”. The exact message that Citi would want promulgated before a sale or breakup or split. BTW, Faxon is not so stupid as to believe that a few quarters of Katy Perry and some black ink could make up for a debt that could eat Cleveland (Rock and Roll Museum included). He’s doing the bidding at this point of his real masters, Citi, and they do want, they demand, that display of spunk and backbone and defiance, such as this memo plays to, more than Hands/Faxton could do anything with, ever again. That play is over. This memo is the pre-sale dialogue to advise probable buyers, “this isn’t going to be a cheap deal”, that and that only.
Your take on this drama was spot on, and, this is the next act… in a record business tragedy.
George D
Exactly Moses! Like Roger Faxon (or any other EMI Executive) would have ANY CONTROL over what happens when the company is forclosed on – and it’s just a matter of time.
No company, no matter how well they are doing, can afford three hundred million dollar a year loan payments.
The question I have is “How much CAN Citigroup get for this asset?
We know what they can get for EMI Music Publishing (around Three Billion), but who wants the label side? Perhaps someone who just wants the catalog and turns it into a licensing entity and GETS OUT OF THE FRONT LINE BUSINESS ALTOGETHER!
Thanks,
Ritch Esra
Music Business Registry
Golly, Avalon, I guess I’m wrong. You’ve nailed it, son, doe and done. I’ll just be leaving now.
Nothing personal, Roger, as I said I do not believe we have ever met. But, don’t go anywhere. Don’t quit. I’ve heard you’re a good guy to work for, and I know you’re heart was in the right place with your memo. But facts are facts. It’s not your fault that you were set up to fail. I think Guy owes you a drink, an apology and a parachute.
Paul McCartney… this is your chance! You are the only music guy I am aware of who could fund and orchestrate a music purchase of this size.
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Before I unsubscribe from your newsletter – I’m a Sr VP in the EMI system who is trying to add real value to the music business equation. While I value critical analysis, I’m done with over-inflated negative commentaries (Lefsetz, and maybe Avalon) and prefer to give my attention to constructive commentary (Seth Godin). Investor dynamics may always be self serving and potentially destructive to their assets, but underlying this is a music business that is actually evolving due to the hard work of a lot of sincere, innovative, and passionate people who love music and are trying to help good music and artistry proliferate in such a way that all the legitimate supporting players acutally make some money. Your EMI doomsday article went way over the line. Are you a legitimate supporting player Moses? If not, I don’t have time for you anymore.
@Casey. If you are an avid reader of my work you would not even be asking this question nor comparing me with Lefsetz. Bob and I rarely agree on anything and I am ALL ABOUT constructive work. I’ve helped draft legislation that has improved the music business and I am an artist’s rights activist who donates 100s of hours a year to helping acts avoid rip-offs. My books are required reading in over 50 music business programs. I mediate (for free ofttimes) situations that get artists (and labels) out of bad deals, I’ve found and helped to redistribute over a million dollars to US artists from European Black Box accounts. But mostly, as far as I can tell, I am the ONLY journalist who supports the actions of major labels in their war against ISPs. Every other blog, Bob’s especially, seems to be throwing dirt on the grave of the entire industry, meanwhile I’m one of the few who write about how music is still viable. I mean, have you really read my previous posts over the past two years? It doesn’t sound like it. The EMI piece is the first pessimistic piece I’ve written in a very, very long time. And i stand by my analysis. So go head, unsubscribe, because it doesn’t sound you ever really were one of my readers to begin with. ‘Caus, if you think I’m one of the bad guys then you’re really not paying attention.
You asked for dialouge on your blog and this is the response I get? I’m disappointed. I apologize for the Lefsetz comparison, it’s been to long since I read him. I have been a fan of yours, the EMI thing just went over the line, to me it was sloppy journalism…that part of the article is not you. You have obviously done some contributive work – thank you for that. I’m just tired of good people at major companies constantly getting a bad rep from everyone on the outside looling in…uh, kinda like I just got. You have no idea who I am and I will not even begin to defend myself.
@Casey. You’re right, I don’t know you at all. All I know so far is that you accuse me of something without really thinking it through. Which makes a bad first impression.
Now as for sloppy journalism, show me EXACTLY, where my facts are wrong. Not opinions, opinions are not journalism. Show me a FACT that I got wrong, and I will bow to your eminence. But if you simply disagree with my opinion that EMI is in serious trouble, well, cool. But that is not journalism, that’s punditry. Which you are free to disagree with, but you can not really call it sloppy because the opinion is shared by many that are far smarter and more informed that I. Several on the inside of this deal have emailed privately with comments like “you don’t realize how spot on your are.” The few who have posted here, Roger himself, who posted above these comments, is the mere tip of the iceberg.
If you’re going to call my facts sloppy, back it up. If you’re calling my opinions sloppy, then be prepared to criticize a lot of others as well.
Oh, and BTW, apology accepted.
This is some of the best back & forth I’ve seen since Lefsetz took on Gene Simmons in Toronto. Great commentary.
Btw, what’s the Capitol building worth?
KNTV, the NBC affiliate in San Jose, CA is reporting rumors that as of tomorrow (Nov 15) iTunes will begin selling the Beatles catalog owned by EMI. Currently, the Apple website (www.apple.com) splash page says “Tomorrow is just another day. That you’ll never forget.” It goes on to say that we should watch for an important announcement from iTunes.
So… I love ya Mo, but just maybe Casey knows something that you don’t … and the sale or licensing of the catalog of the most famous band in the world to the largest online music retailer in the world just might be a game changer.
You’re right. My hasty commentary misrepresented you and your body of work. My sincere apologies Moses.
My closing thoughts…
As I believe you feel, I am concerned for so many good and talented people who are challenged every day to stay optimistic about their work in the music field or who aspire to even get started in a music career.
I am just one of many people in a major music company who aspire to bring constructive change to an industry that’s hurting…we still have hope. Your comments can have impact on our thinking for good or bad.
We all crave hope, and I believe Roger is doing a good job giving that to the people of EMI.
I’m still subscribed.
Hey Moses,
Let’s give the guy a break… he misspoke. We (musicians, songwriters, engineers and producers) need our label executives to stay on this problem and figure it out! I’d like to team up with them rather than beat them up.
It is wellknown that many of our label executives have odd backgrounds for business executives. McGinty appears to be trying!
The difficulty with Plr content is that most people fail to put it to use correctly. People really should either work with it to generate suggestions for themes to write about or even thoroughly re-write it or ” spin ” it up and afterward set their own name on it.
I’ve been following this mess for several years and I’m struck by how much it resembles the problems of homeowners who bought houses for 600k that are now worth 300k.
Nearly all of the ridiculous and destructive mergers of the past decade or so were crafted by powerful idiots with little prior experience in the Music industry, a booze mogul, a water utilities company and with EMI, they overpaid with leveraged money.
The problem also resembles the mortgage backed securities mess. The imagined price of a cd at the time these deals were cut would be the equivalent of ‘mark to model’ or the assumption something is worth an imagined value.
Before what’s left of the majors can do much of anything they will need to go through a painful period of ‘price discovery’ in order to mark to market and revalue their entire label portfolios based on a discovered stable price.
They also need, in tandem with that, to immediately begin putting their entire catalogs online at the discoverable price to undermine the flea circus of blogger pirates and the various monstrosities rising from the P2P corner.
They can shed a lot of costs in a move to the cloud and craft a potentially amazing business model.
They also need to ace Search Engine Optimization real fast as a common thing I see is you type a title name like ‘Orgy In Rhythm’ by Art Blakey, an EMI property, and you get a piracy blog with the same name at the top of the page.
Google and the EFF have essentially turned much of the web into a cyber Somalia, a libertarian wet dream and a civil liberties utopian fantasy that conveniently favors their goal of mediating everything possible through their plumbing.