The Mail on Sunday
This may be the day the music died
HE may look like just any other music-loving old hippy, but Guy Hands appears increasingly out of tune with EMI, for which he paid an astronomical £4.2 billion in August 2007.
Hands has already admitted that the company is now worth only about half that sum, making it one of the most disastrous private equity takeovers. He is, of course, trying to sue his backer on the deal, Citi, to save face on this foray.
But it is his spectacular failure to achieve any of the major changes he thought were so desperately needed when he arrived at the music group that is even more telling.
Hands, it will be remembered, not only vilified the previous management for paying for ‘fruit and flowers’ (a euphemism for industry indulgences), he also suggested the company’s artists might like to start working a little harder.
At first glance you can see why. Of the 14,000 artists on EMI’s books, a third had never made an album and 200 accounted for half the group’s sales.
But such a cement-boots approach saw the Rolling Stones and Radiohead walk out while Coldplay would not let EMI market their last album.
Paul McCartney is set to take his back catalogue elsewhere as might Queen. EMI has also just lost a court case against Pink Floyd so cannot sell individual tracks on the internet.
But, not content with falling out with major players on the existing roster, Hands has also set about ensuring that EMI’s ability to secure new talent will be damaged by deciding that the A&R guys must give way to the suits. The emphasis has been to shift away from discovering what will sell and on to how to sell.
NOW, with his plans to pawn the rights to the company’s catalogue in the US, Hands appears ready to whittle away EMI’s attractions to new signings still further. After all, what up-and-coming artist would want to sign for a label that no longer has the ability to promote them in the world’s biggest music market? And without a healthy flow of new signings, just what will happen to EMI in the longer term?
EMI has long had a struggle to build sufficient strength in America, but it is still the fourth-biggest music group in the world after Universal, Sony and Warner. It remains one of Britain’s decreasing portfolio of global champions.
The previous management of EMI flirted with the idea of mergers to address the company’s deficient status in the US and to benefit from more muscular global marketing and distribution.
If Hands cannot raise £120 million or so from his increasingly queasy investors to make sure he doesn’t breach loan agreements with his paymasters at Citi, the American bank will seize control and almost certainly flog the lot to Warner, which is clearly waiting in the wings desperate to swoop.
I am really not in favour of losing another British treasure to an overseas buyer, but a swift death at the hands of respectable Warner, with which the business fit is arguably excellent, would surely be better than the slow dismemberment as Hands struggles to stay just above the jaws of his hungry creditor. MORE countries appear to be throwing their weight behind a tax on the banks. None, however, seems to be able to agree on what to use the money for.
Chancellor Alistair Darling, who favours salting it all away in case the banks fail again, is looking for some kind of accord at this month’s G20 meeting. But rather than concentrating on using the money for a future bailout, surely it would be better to focus on avoiding another banking collapse.
So my money would be on using the levy to pay for the ratings agencies and demand improved standards at the same time.
It is clearly iniquitous that companies pay agencies such as Standard & Poor’s, Fitch and Moody’s to give them a credit rating. I’m sure that it’s all done at arm’s length, but there is a clear potential for conflict of interest.
And when it comes to the quality of their analysis, the ratings agencies were justly criticised for failing to spot the problems building up in the banks – not to mention nations such as Greece.
Using the bank tax to fund the ratings agencies would at least put a divide between them and the people on whom they sit in judgment. And the information would be a free fillip for shareholders who lost so much this time round.