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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.

  • His Master’s Voice is barely audible

    January 5, 2011 @ 1:07 pm | by Laura Slattery

    Bought any 2 for €15s lately? How about a decade-old Stephen Fry novel for €5? HMV, it is feared, is “slowly being consigned to the history books”, according to one retail analyst (Keith Bowman at stockbrokers Hargreaves Lansdown) – and that was before the Christmas carnage. Today, HMV Group’s seasonal trading statement revealed a 14 per cent plummet in sales across the UK and Ireland, with the kicker being that it is to close 60 stores.

    It is expected that around 40 of these will be HMV stores and as many as 20 of them could be outlets of Waterstones, the book chain that HMV bought in 1998. Whereas 12 months ago, it was the 8.5 per cent sales drop at Waterstones that led to a downbeat January for the group and the departure of Waterstones’ chief executive Gerry Johnson, this time around it is the music, DVDs and games end of the company that is suffering the most.

    Reaction to its Christmas sales disaster has hardly been any more life-affirming than at the time of the group’s last set of figures, which saw its moves to diversify into clothing and electrical products described as “smack[ing] of desperation”, again by Bowman. To that, you can add changing stores layouts and the nagging sense that there is a perma-sale. “The market largely expected a profit warning, but the news is still depressing,” Arden Partners analyst Nick Bubb told Reuters this morning. The group is now taking about having to restructure its bank loans in order to avoid breaching its covenants, and Bubb reckons Waterstones could be sold.

    Will HMV still be on high streets and in suburban shopping centres in five or 10 years’ time? As group chief executive Simon Fox said today, the retailer is still profitable. But its status as one of the last men standing in its category doesn’t seem to be insulating it from the fear that the business model of selling hard copies of entertainment products in a physical retail location is fading fast. The brashness of its brand, mainstream stock selections and prioritisation of the DVD market means it is also unlikely to be lamented by the few remaining music-buying stalwarts in the same way as independent record shops.

    HMV’s dog and gramophone logo, adapted from a 19th century Francis Barraud painting called His Master’s Voice, tells us everything about its history and little about either its present or its future.

  • Prescient political commentary from Westlife

    November 22, 2010 @ 3:50 pm | by Laura Slattery

    In case you missed this vital economic analysis, the multi-millionaires Westlife on Saturday called for Irish “positivity”, despite the looming multi-billion bailout and mooted slashing of social welfare, the minimum wage and front line services.

    “The international media and even the homegrown media sometimes say everything is down and gloomy,” Nicky Byrne told the BBC’s World Service. “But there is a lot of positivity still in Ireland. Irish people as a whole are good people. We’ve done it before and we’ll do it again,” he opined.

    The ability to be upbeat in the face of adversity is certainly a quality that’s bound to come in handy during Westlife’s continuing round of album promotion media appearances. Last night, the boy/man band’s single Safe made its debut in the official UK charts at number 10 – crushed, in other words, by the popularity of their personal IMF bogeymen, JLS. Never mind, eh, lads. They can’t all go to number one. Although there was a time when they did, wasn’t there?

    But though it seemed yesterday that for the rest of us – to paraphrase Byrne’s father-in-law, Bertie Ahern – the doom was getting doomier, it turns out that Westlife were right, but just two days early. With the Greens greenlighting an imminent general election, soon the nation’s canvassers will be stocking up on cable-knits, Yeti hats and legwarmers as they “try and dig deep and fix” whatever political patches are still fixable. Meanwhile, rumours that Westlife are releasing a remix entitled (Your Deposits Are) Safe (Bailout Version) could not be confirmed at the time of posting.

  • The Beatles fix a hole for iTunes and EMI

    November 16, 2010 @ 6:31 pm | by Laura Slattery

    After a long and winding road (ouch), the Beatles, EMI and Apple have come together (sorry) to bring us… digital versions of melodies that most people over a certain age have had burned into their musical memories since birth.

    Sure, as this official announcement from Apple makes clear, the Beatles’ back catalogue was a major gap for the iTunes store that has now been filled. I’m off to download For No One for €1.29 to get me through the melancholy day that’s in it. But frankly, the only way it’s possible for me to get excited about anything connected to the Beatles – whose cultural supremacy has long been supported by the economic weight of the baby boomer generation – would be if Steve Jobs invented a time machine and transported us back to a time when A Hard Day’s Night sounded fresh again.

    Still, despite my personal Fab Four ennui, the assertion of EMI chief executive Roger Faxon that “the Beatles and iTunes have both been true innovators in their fields” does rather stick in the craw. I’m not sure anyone who screamed their way through Beatlemania could ever have imagined their artistic contribution would be reinterpreted as the business jargon of “innovation” and placed in the same sentence as a logistics company like Apple (notwithstanding the many nerdgasms Jobs may have generated over the years).

    For EMI, the Beatles-iTunes deal comes at a critical time for the debt-saddled music label, which as of now is owned by the private equity group Terra Firma. It bought EMI at the peak of the market in 2007 in a move it now regards as a big mistake. Guy Hands, Terra Firma’s chief executive, recently lost a court case he took against Citigroup in which he claimed his long-term Citi banker duped him into buying the label (by pretending, estate agent-style, that there was another bidder on line two). Having breached the terms of its debt agreement with Citi, Hands – who was never much loved by EMI’s artist roster – is now fighting to keep control of the label.

    Flogging a few Beatles tracks on iTunes will probably come too late for Terra Firma. But it’s feasible that the licensing deal will eventually clock up the cents for EMI and the Beatles alike – there may indeed be a HMV-shy generation out there who will be moved to find out who this “Ringo” is that their grandparents start banging on about whenever they indulge in a little arrhythmic Rock Band drumming.

    Now: which Beatles song for the Christmas number one?

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