Tuesday, February 1st, 2011 at 2:17 pm
EMI, one of the four major record labels left, is now officially owned by the CitiGroup. Terra Firma, the venture capitalist company that acquired EMI owes CitiGank roughly 3.4 billion pounds in loans (plus I’m sure a bunch of interest) for the company . However Terra Firma leveraged their debt in the form of equity. This means that instead of Terra Firma owing CitiGroup 3.4 Billion Pounds, Terra Firma transferred 65% of the company to CitiGroup and lightened their load of debt to CitiGroup to 1.2 Billion pounds.
So what does this mean? Most likely CitiBank is going to start liquidating all of EMI’s assets. It has been rumored that Warner Music Group might be interested in acquiring EMI (Warner’s stock is already up 3% as off 12:42 pm today). They have been working on this acquisition for years, but now that CitiGroup is in control on the commodity it would be easier to be put the transfer of the company in motion. There could be a bump in the road in that EMI’s “moving parts” might be more valuable than EMI as a whole. So instead of CitiGroup selling their portion of the company to another entity outright (potentially at a loss), they might bleed EMI’s mechanical royalties, publishing, ect for everything it has until they re-coup their losses.
So what does this mean for rap nerds? Well when banks take over a company like this they have a tendency to lock things down. They might drastically cut human resources that could impede on the releases schedule of certain albums. For example albums like Raekwon’s Shaolin vs. Wu-Tang album could potentially be put on hold since the company, who is set to market and distribute it, has such an uncertain future. I’m not saying this is going to happen. I’m just saying that it might.
Edit: So after getting on my analytical sh*t it’s looking like EMI is liquid with about 300 Million pounds which will most likely allow them to continue on with their current operations…for the time being. You gotta remember while they have 300 Million in the bank they still owe 1.2 billion.
What does this mean for major labels? It’s simply an indicator of changing times. The major labels are built on financial models that simply don’t make sense. They are operating their companies at a financial loss, which is simply not sustainable. I think they are going to become companies that mainly concentrate on promoting and marketing singles…not albums. Physical CD’s are for the most part dead, and music is being monetized digitally on a song by song level. It would be great if they implemented the 360 model they love to hype, but it seems like most of these companies have had trouble implementing the philosophy. However, these companies are still figuring it out, and it is not a model that I think they will abandon. At least not for awhile. One thing I will say is that video IS THE FUTURE of the music business. At least from a monetary perspective. You may want to check out my article on how hip-hop blogs don’t break artists because it is kind of related.
So while the bad news is that major labels may not value full length albums like they used to. The good news is that the artist has more control of what they do, and how they do it then they previously had in the history of music. God bless the internet for that. Plus these powerful music institutions created a power vacuum. So when they become less powerful and relevant it allows for new institutions with fresh people with fresh ideas to be created. Something that most certainly excites me. I’m much more interested in creating an institution as opposed to working for one.
The money is f*cked up right now, but in the grand scheme of things I think that this is a pivotal time for music. Keep your eyes and your ears open, because we might just be witnessing changes of serious historical importance…#Swag.