Terra Firma gets a second chance in EMI claim

Guy Hand's Terra Firma has been given a second chance at reclaiming an estimated $4 billion in damages from Citi-Group after a New York appeals court ruled that the jury in the case brought by Terma Firma after their disastrous purchase of EMI had been wrongly directed by the Judge. Terma Firma have alleged that they were tricked into the purchase of the music group after Citi had told Hands that Cerberus were also bidding for EMI, artificially pushing the price up as there was no such offer - made more complicated as Citi were advising both EMI and Terra Firma. The appeals coirt said the judge erred and should have directed that the fraud allegations should have been assessed under English law and that Citi would have needed to rebut Terra Firma's claims. Terra Firma lost an estimated £1.75 billion on the purchase of EMI which was subsequently reclaimed by Citi and its recorded music division sold principally to Universal and Warners, and its music publishing division acquired by a Sony led consortium. 

Label news

Warner Music saw revenues rise by 8% year on year in the quarter to 31st January 2013 to $675 million, while operating income was up 159% to $57 million and net income moved into profit, to $2 million, from a loss in the same quarter a year earlier. In other Warner's news, Edgar Bronfman Jr, the former CEO of the mini-major, who led the consortium that bought the music firm from Time Warner in 2004, has left the company's board.

Revenues at Universal owner Vivendi were stable in the first quarter of its current financial year, though net income slipped by 18.5%, from 825 million euros to 672 million. The entertainment and communication group's mobile business that caused most of the slide. Universal Music, in contrast, saw its revenues rise 13.5% year on year in the first quarter, to 1,091 million euros. Better than expected income from the mega-major's newly acquired EMI units contributed to that upturn. Digital products generated 54% of Universal's recorded music revenue in the period, compared to 46% in the first quarter of 2012.

And the CEO of hedge fund Third Point, Daniel Lobe, has called on Sony Corp to sell off a slice of its entertainment business in a bid to boost profits, according to the New York Times. The US-based Sony entertainment group includes the Sony Music record company and the firm's half of the Sony/ATV music publishing business. Third Point own 6.5% of the shares in Sony Corp. 

UMG on the hook for HMV?

The Telegraph has reported that Universal Music has ended up with EMI’s liability for the leases on 40 HMV stores, something that could become a £150 million problem if the entertainment retailer was to go under in the new year. EMI committed to guarantee about 40 HMV leases when the retail firm, previously a division of the music major, was spun off as an independent business in 1998. 

Brazil blocks EMI mergers

Both Sony/ATV and Universal have been told by the Brazilian competition regulator that they could not merge the respective EMI publishing and recorded music  businesses with their existing companies in Brazil. This is a more difficult position that both majors faced in Europe where divestments had been agreed. US regulators did not set any hurdles for the two mergers, seemingly relying on the EC measures with the recorded music sector. In one of his first interviews since acquiring the EMI record companies, Universal chief Lucian Grainge said he planned to launch EMI's American label brand Capitol in the UK, the mega-major having been forced to sell off EMI's UK-based Parlophone brand by European regulators.

Did Sony scupper iStream?

The New York Post has marked an interesting result of the recent SonyATV-EMI merger, saying the new music publishing giant effectively blocked Apple's new iStream project - the proposed iTunes streaming service. A number of commentators had warned that the combined might of Sony and EMI in music publishing and Universal and EMI in sound recording markets could block new entrants from the digital market - but this story is more complex - it seems that Sony simply refused to give Apple more favourable rates than those available from the US collection societies BMI and ASCAP or from SoundExchange, the body which represents sound record rights holders in the online radio space, and which also licenses services like Pandora.

Universal get EC green light for EMI deal

UMG have been given outline approval by EC regulators to buy up EMI's recorded music division - but the major will have to divest a number of key catalogues to meet competition requirements. Among the EMI assets to be sold are the Parlophone, Chrysalis and Mute labels and catalogues (minus The Beatles and Robbie Williams) and the EMI Classics division. A number of commentators, in particular independent labels, say that the move will give UMG unassailable market dominance alongside Sony, who since purchasing EMI's music publishing division, have a 30% plus market share in the business of songs. It is expected UMG will have a 38% plus share of the global market in recorded music and many fear that the major will use market dominance to either prioritise its own services such as Vevo, or insist on large upfront payments or equity stakes in new digital start ups which want to use music, as it did with Spotify (UMG own 4% of Spotify, EMI 1.9% and Sony 5.8%, and Sony and UMG jointly own Vevo with the Abu Dhabi investment company). The deal is still subject to US  regulatory approval, which is expected next week. The Commission said that "the very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits". Pan-European indie labels trade body IMPALA did not agree, and said it would consider its options once the EC's full decision was published.

UMG pay up towards EMI - as regulators reach conclusions

Universal Music has paid just under a billion of the £1.2 billion that it committed to pay Citigroup for EMI's recorded music division, according to parent company Vivendi. Decisions by EU and US competition regulators are nearing completion with at least some divestment of catalogues such as Parlophone and Chrysalis mooted for the EU if the sale is to go through.

EMI makes money but posts a loss

EMI has reported a pre-tax loss of £349 million for the year ending 31 March 2012 after a write down of catalogue assets totalling £372 million and redundancy payments of £37 million pushed the major into the red. After taking these costs into account, underlying earnings were £290 million, and EMI’s operating profit was up to £133 million, prompting EMI boss Roger Faxon to tell staff that the figures represented an "incredibly strong performance... set against the backdrop of a challenging state of the music market and wider economic conditions".

Warner Music saw revenues slip in its third quarter - partly because of currency fluctuations, though with costs down the mini-major was able to reduce its losses overall, to $32 million, compared to $46 million in the same period a year earlier. Digital revenue continued to boom, offsetting the continued slump in physical sales. The major said its digital revenues were up 13% (16% with constant currencies), and now accounted for 41.5% of all recorded music income.

IMPALA co-president gives conditional approval to UMG-EMI deal

In a surprise move, one of the key players in Europe's independent label sector, Naïve Records' Patrick Zelnik, has come out in support of Universal's bid to buy the EMI record company, subject to certain provisions. Zelnik cautions against outright war within the record industry, between Warner and the indies on the one side, and the two big acquisitive players, Sony and Universal, on the other. Zelnik fears private equity groups asset stripping the music industry more than UMG, and says that Universal should commit "first, to transparent, non-discriminatory, easy licensing to new platforms. This should encompass Universal, EMI and independents, representing the majority of the market - the rest would soon follow". Second, Universal should make targeted, surgical divestitures to independents instead of to hedge funds, private equity or pension funds. As co-president of IMPALA, its an interesting opinion!

Universal-EMI tie up green lit in Japan

Japanese regulators have approved the £1.2 billion takeover of EMI's recorded music division by Universal - the deal is still awaiting regulatory approval in Europe and the USA. No conditions were attached.

Congress get to hear about UMG about EMI

Universal's proposed takeover of EMI's recorded music division has had a congressional hearing next week with a public airing of the arguments for and against the acquisition in the USA - with music industry veterans Lucian Grainge, Roger Faxon and Irving Azoff speaking up for the UMG-EMI tie up and, Edgar Bronfman Jr and Martin Mills against along with Gigi Sohn from American lobby group Public Knowledge. The congressional session took place on Thursday, 21st June and Grainge insisted that everyone would be a winner if and when the Universal and EMI labels unite, saying, according to the Financial Times: "Our coming together will benefit consumers, artists and all those committed to a diverse and healthy music business". But Mills countered that the only people who would actually benefit would be Universal's owners and management, who were, he claimed "monopolists" seeking market power. Edgar Bronfman Jr said that a combined Universal EMI would be "one innovation-stifling dominant player".

UMG-EMI merger heads to Congress

Universal's proposed takeover of EMI's recorded music division will get a congressional hearing next week with a public airing of the arguments for and against the acquisition in the USA - with five music industry veterans booked to speak - Lucian Grainge, Roger Faxon and Irving Azoff expected to speak for the UMG-EMI tie up and , Edgar Bronfman Jr and Martin Mills agains,t along with  Gigi Sohn from American lobby group Public Knowledge. The congressional session will now take place next Thursday, 21 Jun.

The European Commission's have agreed to provide UMG with a statement of key objections to Universal's bid to buy the EMI record company.  The key concerns have been identified via the Commission's in depth investigation into the acquisition proposals. Although the statement of objections is a routine part of the EC's merger investigation process, it confirms that European regulators want some key issues to be addressed before the deal can be considered for approval. EU Competition Enforcer Joaquín Almunia said on Friday: "A company with a large and popular catalogue can have significant market power over digital platforms, which would have a keen interest to strike a deal with it. Ultimately, we will need to make sure that the company that would emerge from the deal would not be in a position to shape the future landscape in the digital music market to the detriment of users and artists". Welcoming the concerns expressed so far by the Commission, Helen Smith of IMPALA, the pan-European trade body for the indie label sector and one of the most vocal opponents to the deal, said"We welcome this news and expect to see a strong statement of objections confirming the Commission's earlier findings that Universal is a danger in the physical and digital market because it cannot be adequately constrained by competitors, customers or piracy". The Commission hopes to make a ruling on the Universal/EMI deal by the 6th Sep. The Federal Trade Commission in the US is concurrently reviewing the merger, while the transaction is also due to be debated in US Congress by the Senate Judiciary Committee's antitrust subcommittee on the 21st June.

EC get more EMI time

The European Commissions review of Vivendi's Universal Music Group bid to buy British record label EMI's recorded music unit from Citigroup Inc has been extended for the second time to Sept 6th from Aug 8th after the Commission asked for more time.

Speculation that controversial MP3 resale service ReDigi wouldn't be able to afford to fight its legal battle with EMI has been dismissed by the company behind the digital resale service. Rumours started to circulate when lawyers working for the digital start-up filed a motion to withdraw from the case last week. ReDigi have said they now have a new firm of lawyers representing them in their battle with EMI who failed to obtain summary judgement in February after the judge hearing the case ruled that the debate on the legality of the resale of MP3 digital files was too complicated for a judgement to be made without a full trial. He added that the dispute at the heart of this case was a "fascinating issue" that "raises a lot of technological and statutory" points.

EC approves Sony/ATV's EMI deal

The European Commission has approved the deal in which the Sony/ATV led consortium will acquire EMI Music Publishing. Confirming the deal had been approved in Europe, the EC's Competition Commissioner Joaquín Almunia said "[The consortium] offered to divest valuable and attractive catalogues containing bestselling titles as well as works of successful and promising authors. I am therefore satisfied that the competitive dynamics in the online music publishing business will be maintained so as to ensure consumer choice and cultural diversity". Martin Bandier said "Having spent over seventeen years of my professional life helping to build EMI Music Publishing, today is not only an important milestone on the path to final approval, but a very special day for me, personally". The EC approved the deal on the basis of the proposed sale of the Virgin-branded songs catalogue, plus the Famous UK catalogue and some key songs by prominent Anglo-American artists, which were designed to specifically deal with those EC concerns. Although the Sony/ATV deal still needs approval in the US, and is also being investigated in Australia and Brazil, securing approval in Europe with just a one-stage investigation is a considerable step forward for the deal. Not everyone is happy – commenting on the EC approval IMPALA’s Executive Chair Helen Smith told reporters: "It sounds like the worst possible result for European writers and publishers, as well as anyone who needs to rely on fair terms to access music

US Talent Unions back UMG on EMI takeover

In a surprise move, two of the US’s biggest talent unions have come out in support of Universal’s takeover of EMI’s recorded music division on the ground that UMG would, unlike previous owners Terra Firma, actually invest in music and musicians. In a letter to the U.S. Federal Trade Commission Chairman Jon Leibowitz The American Federation of Musicians said that UMG had shown “compliance with and respect for its collective bargaining agreements has been positive when compared to its peer companies” and that “Sustaining the EMI legacy” under Universal’s ownership “would appear to benefit AMF recording musicians.” The recently merged The Screen Actors Guild and the American Federation of Television and Radio Artists said Universal has shown commitment to the music industry, investing in new artists and innovative musical genres in a separate letter saying “For EMI to be left to further drift into oblivion, or for EMI to be acquired and sold off in pieces by capital investment speculators with no appreciation for, or commitment to, artists who fuel the recording industry, would ill serve the industry,” SAG-AFTRA said.

EMI sale raises more competition issues

Whilst its rumoured that Universal Music may well be selling some of their music publishing catalogues to fund their planned purchase of EMI's recorded music divisions, UMG has so far resisted the temptation to offer concessions to competition regulators in Europe during the European Commission's initial investigation into the proposed acquisition. However, Sony/ATV has apparently offered concessions in a bid to allay fears about its acquisition of the EMI music publishing business. Sony/ATV (Sony own the company along with Michael Jackson's estate) is leading a consortium of investors to buy EMI Music Publishing, which is likely to remain a separate entity if the takeover goes ahead - but even an independent EMI would still report into Sony/ATV's management. The EC confirmed Sony/ATV had offered concessions yesterday, but gave no details as to what exactly they were. The regulator added that the proposals would push back its phase one investigation into the Sony deal until 19th April, when it will announce whether the Sony-led consortium has won approval, or whether a full three month inquiry will be required for this deal too.

Meanwhile, in the US, California's Attorney General Kamala Harris has reportedly started making her own inquiries into the two EMI deals, separate from the ongoing competition investigation being conducted in the US by the Federal Trade Commission. According to Bloomberg, Harris's office has made contact with various people and organisations likely to be affected by the deal, though it's not clear to what end, or what power the Attorney General would have to hinder any deal-making if both transactions were approved at a federal level. And the Commerce Commission in New Zealand has invited interested parties to make submissions to its inquiry into Universal Music's proposed takeover of the EMI record companies. Areas on which the Commission says it will be focusing include Universal's claims that the independent sector in New Zealand currently enjoys a strong competitive position, the extent to which artists can now circumvent the label system, and the extent to which piracy limits the big rights owners' power in setting prices, especially in the digital domain. A final decision is due on 13 May although the European Commission has said that it will need until August to review Universal's EMI bid. In Europe the acquisition is being strongly opposed by pan-European indie label trade body IMPALA, while Warner Music is thought to be lobbying against the deal in both the US and Europe.

Oppostion to EMI sale gows

Public Knowledge, a campaigning group that lobbies on internet and intellectual property issues, has submitted a letter to the Federal Trade Commission in the USA arguing that an expanded Universal and Sony after acquiring the recorded music and publishing divisions of EMI respectively would be very bad news for the emerging digital music market. PK urges FTC officials to consider how the deals will "impede investment, innovation, and therefore competition" and affect "the development of music distribution and other services that ultimately benefit musicians and their fans everywhere. Public Knowledge claims that even in today's market place a major label can wield sufficient power to demand that potential new digital music services pay the label hefty advances and a high percentage of future revenue, or give the record label an equity stake and it will be impossible to enter the digital music market without Sony & UMG board (with only two majors left, Warners a mini-major). Indie labels trade body Impala and Warners have already raised opposition to the sales.

EMI joins battle against Grooveshark

EMI has joined fellow majors Universal, Sony and Warner in suing Grooveshark. But in a slight twist, EMI Music Publishing filed a lawsuit against Grooveshark operators Escape Media claiming the digital firm is in breach of the licensing agreement reached in 2009 at the conclusion of a previous legal dispute for the non-payment of royalties and according to reports, the legal papers filed with the New York State Supreme Court claims Grooveshark "hasn't made a single royalty payment to EMI, nor provided a single accounting statement" under the existing licensing deal, and that the digital firm now owes at least $150,000 in royalties. Responding to the EMI action, the streaming platform said in a statement "This is a contract dispute that we expect to resolve".