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  • Will recorded music be money for jam at EMI-devouring Universal?

    November 12, 2011 @ 9:00 am | by Laura Slattery

    The claim that record labels are pretty terrible at doing business has become a truism of the iTunes age as tired and old as a Saturday night line-up at Glastonbury. But to be fair to EMI, the debt-riddled British music group set to be split in two, it managed to survive 110 years before it found itself, four years ago, in the clutches of Guy Hands, the private equity boss who didn’t seem to like his musical toy very much and in February lost control of it to its bankers, Citigroup.

    EMI, which began life as The Gramophone Company in 1897, survived the First World War, when its gramophone factory was turned into a munitions plant. It survived the Depression (the 1930s one), when music sales plummeted like a stone. More recently, it survived Joss Stone. Credit where credit is due, or at least that’s what Citigroup must have wished when it was forced to write down £2.2 billion in EMI’s debt. Nothing lasts forever. EMI’s friendless failure reinforces the received wisdom that record labels simply can’t cope with the era of music piracy. But like Louis Walsh’s fondness for telling X Factor contestants that they’ve “got the whole package”, this is hollow cliché. It’s like bellowing the downbeat verse, then murmuring the upbeat chorus.

    Universal Music Group, owned by French media conglomerate Vivendi, yesterday fended off its rival Warner Music to buy the recorded music division of EMI from Citigroup. For a sum of £1.2 billion, Universal has not “got the whole package”, but the part that includes a roster of globally successful artists such as Coldplay, Katy Perry and, most importantly from a profit-spinning point of view, The Beatles. Sony, meanwhile, the third of the “big three” majors, has landed EMI’s publishing arm.

    The deal is so good for Universal – already the biggest recorded music company in the world – that it might, in fact, prove too good and fall at the regulatory hurdle. If so, Universal will have to dispense with the massive economies of scale that the EMI purchase would bring and make do with, say, yielding reams of cash from Lioness: Hidden Treasures, a collection of Amy Winehouse tracks cobbled together by its Island Records imprint for festive posthumous release.

    So how is the whole death-of-the-album thing progressing then? Not too well, in fact. The recorded music industry in 2011 is like the Kings of Leon’s “Sex on Fire” – it sucks people in despite its obvious awfulness and then it stubbornly refuses to die. Industry-wide, album sales, including digital downloads, are up 3 per cent this year, according to figures from the tracking system Nielsen SoundScan. A total of 255 million albums have been sold in the US so far this year, compared with 247 million this time last year – at which point, album sales had been running down 13 per cent on 2009. The figures suggest a bottom has been reached. The fact that the bottom sort-of coincided with the reign of “Sex on Fire” is merely, well, coincidental.

    The UK’s Official Charts Company last weekend announced that digital album sales in the UK had “smashed” their 2010 total. Now this, to me, didn’t initially sound like the kind of statistic that would set label executives trilling with delight – surely, with continued smartphone penetration and the retrenchment of the last-dog-standing in music retail (HMV, also a descendant of The Gramophone Company), digital album sales should have surpassed last year’s figure sometime before mid-November.

    But that was before I had considered the Brucie-bonus that is the strange waiting period between Christmas and New Year. For the last five years, the biggest week for digital album sales has been the final week of the year, when not only do consumers use up the digital music gift vouchers slipped into their stockings, but they also have new iPhones, iPods, tablets and laptops to send them hurtling to the iTunes store. Clicking the “buy now” button sure passes the time when you’re watching Jools Holland pretend it’s New Year’s Eve on New Year’s Eve.

    Geoff Taylor, chief executive of British music industry body the BPI, believes the final week of 2011 may see the 1 million weekly sales barrier for digital albums broken for the first time. Even if it transpires that everyone already has the Adele album and no one’s much fussed about Lady Gaga anymore, it’s still likely that digital album sales in the UK will run in well ahead of last year’s total of 21.3 million copies. Already, they represent a 26.2 per cent share of total album sales, up from 17.5 per cent in 2010.

    Investors, too, are beginning to whistle a new and chirpier tune when it comes to the recorded music industry. In May, Sean Parker, Napster founder and former scourge of the record labels, declared that the labels’ recorded music assets were “dramatically undervalued”. Yesterday, Ben Rumley, an analyst at London firm Enders Analysis, told Bloomberg that “we might be getting close to the point where the decline, in the recorded side at least, is ending”.

    But not everyone agrees that the industry is going to manage a complete key change from piracy and frantic live touring to legal downloads and music-streaming subscriptions. Technology research firm Gartner said on Tuesday that although global online music revenues would rise 7 per cent this year to $6.3 billion, this would not offset the speedy decline of sales of physical CDs. By 2015, Gartner forecasts that online music spending will rise to $7.7 billion, up from $5.9 billion in 2010. In the same period, it predicts that spending on physical CDs will decline from $15 billion to $10 billion.

    The maths still leave big numbers in the kitty, though I’m romantic enough to hope that there’s another factor that might yet boost music spending beyond all expectations, and change the world while it’s at it: It’s the crazy idea that there’s some pulse-racing, politics-infused movement around the musical corner – some sound or voice of a kind not heard before that’s capable of drowning out the prevalent, pernicious nostalgia of 20th century band reunions, the dullness and hesitancy fast enveloping the Mercury genre and the creative bankruptcy of 90 per cent of porn-pop. The headlines today focus on Universal’s pledge to keep EMI’s iconic Abbey Road studios intact “as a symbol of the creative community”. But if Universal and fellow majors Sony and Warner don’t look to the future as well as the past, then they’ll be the ones left floundering to the strains of Sex on bloody Fire when the next wave hits.


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