EMI Evolves Along With Music Industry Changes

Back in the nineties, when CDs were selling strong, we called the major labels the Big Six. After the music business’s major transformation over the past decade, we’re down to the Big Three — officially speaking anyway. EMI, one of the so-called Big Four major record labels, no longer considers itself a “label” per se, […]
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Back in the nineties, when CDs were selling strong, we called the major labels the Big Six. After the music business's major transformation over the past decade, we're down to the Big Three -- officially speaking anyway.

EMI, one of the so-called Big Four major record labels, no longer considers itself a "label" per se, but a "comprehensive rights management company" under the new leadership of Roger Faxon, formerly the head of its robust publishing division.

EMI's new strategy was undertaken after months of soul searching by its relatively new owner, private equity firm Terra Firma. And it just might work, if the new version of the company -- with its emphasis on uniting publishing and sound recording rights to facilitate a wider range of deals in a faster, simpler way -- succeeds in reflecting the ways in which the music business itself has so fundamentally changed.

EMI's theory: Music surrounds people more than ever, in online videos, interactive streams, advertisements, feature-length films, television shows, mobiles apps, and so on. They just don't buy it as much as they used to.

This might be the first major label to recognize that new reality by fundamentally reorganizing its business around comprehensive rights licensing, rather than counting on fans to keep paying for recordings. But it likely won't be the last.

Increases in digital revenues have failed to offset declining physical sales, and making matters worse, older catalog titles recorded during the music industry's heyday often bring in a disproportionate percentage of revenue, leading to speculation that the major labels would eventually become catalog-licensing businesses rather than continuing to invest in new bands. That appears not to be the case, entirely, as far as EMI goes.

"The commitment to discovering and promoting new music is absolutely essential to our future growth," said Faxon in an internal staff e-mail obtained by Wired.com. A source close to the situation confirmed that, claiming that the company will continue to sign new artists and songwriters after this transformation -- it will just focus on signing them to multi-right deals, or providing those that do not wish to have a label with other label-like services.

Faxon added, "we need to recognize the power and importance of the extraordinary catalog of recordings we represent, and as we do that we need to respect the creative contribution of all the talented artists who made those recordings."

The focus, for new and old artists alike, will be more on inking deals for sound recordings, publishing, and merchandise whenever possible, to allow the company to make money for itself and its artists on a variety of fronts even if nobody pays for a single disc or download. Licensing music for these new uses, rather than funding an entire department dedicated to selling music to a shrinking number of consumers alone, could be just what the doctor ordered for the beleaguered company, which has required cash infusions from investors to stay afloat despite reporting a few signs of life lately (numerous publishing awards, increased market share).

Today's rapidly-changing digital music landscape, which encompasses user-generated videos, videogames, interactive apps, and other distribution mechanisms that didn't exist when the traditional music business evolved, requires the signoff of both the publisher/songwriter and the record label/artist. For example, EMI itself owns certain Beatles rights, but reportedly can't come to terms with Apple Records in order to sell the band's music digitally. If the company managed all of those rights, it would be easier for it to license that music for new uses of the technology.

EMI already does this for Gorillaz, Norah Jones and the vast majority of its 200 or so new artist deals signed in the past year. As a result, it can negotiate more effectively with sites like YouTube, services that place music in films or advertisements, iphoness app developers, and other new players, because it speaks for a large number of artists -- as many as it manages multi-right deals for. The company had already begun evolving past a being a traditional record sales-based organization, but today's announcement makes it official.

This comprehensive rights strategy has many precedents, including the 360-degree deal. These days, EMI is not the only organization that finds it only has a slice of the rights necessary to sign off on new uses for music, and so has tried to secure other rights. An employee of another music rights organization who refused to be named or recorded told Wired.com that his organization was hamstrung by only being able to negotiate certain rights. And IODA Music, now partially owned by EMI competitor Sony Music, asks that its artists allow the company to manage a similarly comprehensive set of rights, so that it can move more fleetly when licensing new uses.

A source close to the situation said that while EMI will still offer label-like functions, and will still sign sound recording-only or publishing-only deals, but confirmed that its emphasis will be on managing wider range of rights -- as well as providing modular, one-off services to indie bands that want to keep creative control and ownership of their master tapes. For them, EMI's Label Services division charges them fees to offer label-like functions including distribution, merch, iphoness apps, or whatever other part of "the machine" an artist might need.

The new EMI is a music business with a variety of irons in the fire, but there's one thing it's not anymore, and that's a traditional record label. Former EMI signee and Radiohead frontman Thom Yorke has been predicting doom for the recorded music industry of late, saying it had "months rather than years" until it would implode. Perhaps this is part of what he meant.

It's too early to call whether EMI's new focus will help it survive, but it makes sense -- on paper anyway. If nobody's buying music anymore, it's probably a good idea to focus the business elsewhere.

Here's the full text of the e-mail Faxon sent to EMI employees on Friday morning to announce the changes:

Dear allI wanted to reach out to all of you following the announcement earlier today of my appointment to the position of EMI Group Chief Executive. As I said in the press release, it is a real honour to be given the responsibility of leading the operations of what I believe to be one of the greatest music brands in the world, and I am excited about the challenge of heading the company in the next phase of its long history.

As most of you will know, I have been Chairman and CEO of EMI Music Publishing for the last three years, and have held a number of roles across EMI Music, EMI Music Publishing and EMI Group in more than 16 years with the company. This is a business that I know well, and one which I believe can deliver real growth for the artists and writers that we are all privileged to represent.

My goal is to build a Global Rights Management Business that draws on the expertise and talents of everyone across the entirety of both divisions. I believe that the two businesses, working in concert with one another, sharing the same values, pursuing a coordinated strategy can and will deliver for our artists and songwriters no matter what challenges we face.

That new business needs to be built on some principles that I believe are fundamental to achieving success in this rapidly changing marketplace:

We must be unswervingly focused on championing our artist community, and providing them with the help they need to achieve their maximum potential.

The commitment to discovering and promoting new music is absolutely essential to our future growth.

We need to recognize the power and importance of the extraordinary catalogue of recordings we represent, and as we do that we need to respect the creative contribution of all the talented artists who made those recordings.

We have to be passionate about providing world-class service and services to the many and varied music users and retailers across the globe. We need to be the most trusted and effective partner to them, while also providing fans with the products that they demand.

It is vital that we constantly work to enhance the skills of staff in the pursuit of excellence across all parts of the business.

We must cultivate a culture of cooperation that will enable us to work better and more effectively across different geographies, functions and divisions. In other words, we need to be a team.

We need to bring the fun back into the music business. We need to remember that we are in this business because we love music and admire those who create it. Our joy and enthusiasm for and about music is our greatest tool in building EMI.

I feel fortunate to be joining EMI Music after it has really started to come alive again as a player in the recorded music business. Over the last year or so you have had some striking great successes both in new music and catalogue. And not unimportantly, the company has made great financial progress. I am grateful to Charles Allen for his leadership in making that happen and I look forward to benefiting from his advice and counsel as we build this new business.

I also want to say how pleased I am that Stephen Alexander will be taking on the Chairmanship of Maltby Capital from Lord Birt. John Birt has been a great supporter of EMI for which I thank him. Many of you have come to know and value Stephen in his role as a senior advisor to EMI, and I am absolutely confident that he will be a great partner as we move forward.

Over the next weeks and months, I am hoping to have the opportunity to meet with many of you around the business, to talk to you about my perspective on EMI, and to listen to what you all have to say. I’m very much looking forward to it.

Best wishes

Roger Faxon

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