EMI looks back to move forward

Roger Faxon

If the latest management shakeup at EMI is indicative of anything, it’s that the label fully intends to leverage its massive archive to survive in the future.

Roger Faxon’s promotion to group CEO was announced this week as the troubled conglomerate aims to reposition itself as a “comprehensive rights management company.” Faxon’s 16-year history with the company and his previous stint as film-industry veep will no doubt be tested as EMI charts a new course through rough waters.

“More music is being used than ever before, despite the continued decline in global music revenues,” the firm said in its press release outlining the executive lineup. “As a result, the management structure of EMI is being changed to enable the company to reposition itself as a comprehensive rights management company that can take full advantage of all global opportunities in all markets for music.”

EMI’s struggles, loosely chronicled in these pages, took a dramatic turn earlier this year when acquisition talks failed and CEO Elio Leoni-Sceti abandoned ship in the same month. Parent firm Terra Firma stepped in with an estimated $183 million cash infusion in May to keep the company from spiraling into foreclosure.

Faxon’s appointment and the handful of executive changes that accompanied it suggest further job cuts could be in EMI’s future, writes Gordon Masson in Variety. It also points to a corporate desire to better marry the company’s recorded music and music publishing operations, as Masson notes, “both businesses heavily rely on working with rival companies, as most artists tend to split those deals rather than sign contracts with the same conglomerate.”

That, in turn, implies a lighter commitment to breaking new artists in favor of relying more heavily on selling publishing rights to its enormous back catalog–which includes some little bands like the Rolling Stones, Pink Floyd, and the Beatles.

What this means for newer EMI artists is less tangible. Popular belief has it that an artist doesn’t need a major label to become a massive success anymore. Recent data suggests otherwise. The International Federation of the Phonographic Industry (IFPI) unveiled earlier this year that record labels spend more on research and development than practically any other industry. Music industry A&R and marketing efforts tally some $5 billion annually, representing an astounding 30 percent of sales revenue.

However, new talent investment is not exactly profitable, at least at the outset. One million dollars is the going rate for breaking an artist these days, and that’s conservative. Many labels never see a return on that money. Columbia Records’ UK chief Mike Smith recently told Billboard that long-term profitability stems from a successful catalog. More current artists are licensing their albums to different labels, ostensibly denying one label any rights to their back catalogs in the future. 

EMI’s plan to plum its rich existing back catalog makes more sense when framed in that context. Of course, less emphasis on new talent means less recording, and less recording could mean turning Abbey Road into a museum. Let’s cross our collective fingers that that doesn’t happen.

Lee Simmons

Lee Simmons is a business writer in Austin. He covers the technology and media industries for Hoover's and offers random musings on the state of entertainment (among other pressing issues) for Bizmology. Follow him at Twitter.

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