Entertainment Industry

Category: EMI

Congress to hold hearings on Universal-EMI merger

Coldplay EMI

Sen. Herb Kohl, chairman of the Judiciary Committee's antitrust panel, is planning to hold hearings on Universal Music Group's proposed merger with EMI Music, a union that would give Universal roughly 40% of the U.S. market for recorded music.

No date has been set, according to Kohl's spokeswoman, Dawn Schueller.

Kohl, a Democrat from Wisconsin, was outspoken against AT&T's proposed $39-billion purchase of T-Mobile last year, a deal that failed after the U.S. Federal Communications Commission said it would oppose the merger. Congressional hearings have no formal sway over antitrust regulators who ultimately have the option of trying to block mergers in court.

Universal, in a statement, responded, "We welcome the opportunity to answer any questions that the subcommittee may have, address the facts and debunk myths. Universal Music is committed to reinvesting in EMI to create even more opportunities for new and established artists, expand the marketplace with more music and support new digital services. We remain confident of regulatory approval."

Its $1.9-billion bid for EMI is currently under review at the U.S. Federal Trade Commission as well as the European Commission. Neither has spoken for or against the proposed transaction.

European regulators earlier this year approved a separate bid by Sony Corp. to purchase EMI's publishing business for $2.2 billion, provided that Sony sold off some of its catalog. 

RELATED: 

Universal, Sony win dual bids for EMI

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-- Alex Pham

Photo: Chris Martin, lead singer of Coldplay, a band signed with EMI Music. Credit: Rafa Rivas / Getty Images.

European Union approves Sony EMI merger

Stevie Wonder

The European Union's antitrust regulators on Thursday approved Sony Corp.'s $2.2-billion acquisition of EMI's publishing business, which would create the world's largest music publishing group with rights to about 2 million songs including some by David Bowie, Stevie Wonder and others.

In exchange for the EU's blessing, Sony agreed to sell off several European-based assets that together would have accounted for less than 5% of the combined company's overall revenue, said several executives close to the discussions who did not want to be named because they were not authorized to speak publicly on the matter.

The merger calls for Sony's music publishing subsidiary, Sony/ATV, to administer the EMI catalog on behalf of a consortium of investors, including the Blackstone Group, the Mubadala Development Co., the estate of Michael Jackson, GSO Capital Partners and veteran music and movie mogul David Geffen. Sony itself would be a minority partner.

Geffen's involvement, his first major investment in an entertainment company since co-founding DreamWorks SKG in 1994 -- after a long and successful career in the music industry -- came in the nick of time last fall as Sony struggled to pull together financing for the deal. When Mubadala pulled back some of its investment in the pool weeks leading up to the final bidding for EMI, Geffen jumped into the breach in late October -- days before Sony's offer was due.

Sony still needs to gain the approval of U.S. antitrust regulators who, like the European Commission, must decide whether the deal restricts competition and hurts consumers. The Federal Trade Commission, which has taken the lead in investigating the EMI sale, has not commented on the matter.

Sony, in a statement, said, it "looks forward to successfully concluding the other regulatory review processes that are underway in other regions."

Martin Bandier, chairman and chief executive of Sony/ATV Music Publishing, said: “Having spent over 17 years of my professional life helping to build EMI Music Publishing, today is not only an important milestone on the path to final approval, but a very special day for me, personally.”

RELATED: 

Labor unions back EMI sale to Universal

EMI to be sold to Sony, Universal for $4.1 billion

An EMI merger may not raise antitrust opposition

-- Alex Pham

Photo: Stevie Wonder, whose songs' publishing rights are with EMI, at the Hollywood Bowl in 2011. Credit: Lawrence K. Ho / Los Angeles Times

Two labor unions back EMI sale to Universal Music

Chris Martin of Coldplay, which is represented by EMI

SAG-AFTRA, the merged entity of the Screen Actors Guild and the American Federation of Television and Radio Artists, and the American Federation of Musicians gave their blessings Tuesday to Universal Music Group's $1.9-billion deal to buy EMI's recorded music business, which represents bands such as Coldplay, Massive Attack, Pink Floyd and others, from Citigroup Inc.

The pending deal, forged in November, also calls for Sony ATV to pay $2.2 billion for EMI's publishing assets. Both require the approval of U.S. and European antitrust regulators, who must decide in the next few months whether the deal would restrict competition and harm consumers.

A number of critics have piped up against the deal, including the consumer advocacy group Public Knowledge and Warner Music Group, whose former Chief Executive, Edgar Bronfman Jr., took a swipe at the pending merger in January, calling it "dangerous." (Warner had also offered to buy EMI, but was outbid by Universal.)

It's not usual for a labor union to speak up in support of big business deals. With that backdrop, the dual union endorsements of the merger seems even more unusual, especially because other labor groups such as the Writers Guild have been outspoken critics of media consolidation.

Why this departure, then? In a word -- jobs.

SAG-AFTRA, which represents 150,000 actors, writers, recording artists and other media professionals, acknowledged in its letter Tuesday to the U.S. Federal Trade Commission that the group has "generally expressed skepticism toward corporate mergers and acquisitions." The FTC has taken the lead in examining the merger for potential antitrust issues.

In this case, however, the union said the merger would save EMI from drifting into "oblivion," wrote Kim Roberts Hedgpeth, outgoing co-national executive director of SAG-AFTRA, who this week announced her pending retirement.

Allowing EMI to deteriorate on its own "would also do a disservice to American workers, whose jobs would be at risk should EMI wither further or be sold in pieces to fuel quick profits for capital investors," she added.

Raymond Hair Jr., president of the American Federation of Musicians of the United States and Canada, put forth the same argument in a separate letter to the FTC, saying "sustaining the EMI legacy, which produced world popular music artists such as the Beatles and Frank Sinatra, under UMG's oversight would appear to benefit AFM recording musicians."

So far, neither the FTC nor the European Commission have issued opinions on the merger, which would fold EMI's assets into two of the world's largest record companies and reduce the number of major music companies from four to three.

RELATED:

SAG, AFTRA craft merger plan

Warner vows to "fight" EMI sale

EMI Group sold to Universal, Sony for $4.1 billion

-- Alex Pham

Photo: Chris Martin, lead singer of Coldplay, a band signed with EMI Music. Credit: Rafa Rivas / Getty Images.

Warner's Bronfman vows to 'fight' EMI sale to Universal and Sony

Edgar Bronfman Jr.

Edgar Bronfman Jr., Warner Music Group's former chief executive and outgoing chairman, said his company would oppose the sale of EMI Group to Warner's two biggest rivals, saying the deals would reduce competition.

Bronfman himself had vied to buy EMI's recorded music business last year, but was outbid by Universal Music Group's $1.9-billion cash offer. EMI at the same time also agreed to sell its music publishing operation for $2.2 billion to a consortium of investors led by Sony ATV, a division of Sony Corp.

In a parting shot, Bronfman on Tuesday, his last day as chairman of Warner, told an audience at a media conference in Dana Point that EMI's sale was "dangerous" because the concentration of market share would stifle innovation and reduce payments to musicians they represent. Bronfman said Warner would "fight tooth and nail" to convince antitrust regulators to stop the deals.

A Warner spokesman confirmed Bronfman's comments, made at the D: Dive Into Media conference hosted by the Wall Street Journal, but declined to elaborate on how the company will work to thwart the sale of EMI. Sony also declined to comment on Bronfman's remarks, and messages to Universal were not immediately returned.

The deal, which would reduce the number of major record labels from four to three and the number of big publishing companies from five to four, is currently wending its way through regulatory scrutiny in both Europe and the U.S.

Regulators so far have not raised any antitrust concerns, but aren't expected to make a determination for at least several more months.

Bronfman also took a swipe at Google Music, calling the digital music store an "oxymoron." Warner is the only major label to abstain from selling its music on Google's online store, launched in November. It's unclear how he felt Google's efforts into music were contradictory, but Bronfman followed up his comment by suggesting that the Silicon Valley search giant places more value on the platform delivering content more than the content itself.

RELATED:

EMI sold in pieces to Universal, Sony

Google Music debuts, battles Apple and Amazon

Edgar Bronfman steps down as CEO of Warner Music

 — Alex Pham

 Photo: Edgar Bronfman Jr. Credit: Chip Somodevilla / Getty Images.

 

Universal, Sony win dual bids to buy EMI Group

Capitol Records

Universal Music Group and Sony Corp. have reached agreements with Citigroup Inc. to buy EMI Group's music business for a combined $4.1 billion, an 8% premium over Citigroup's initial minimum asking price.

The dual transaction would split London-based EMI in two, with the company's recorded music going to Universal for approximately $1.9 billion and the publishing division sold to Sony for $2.2 billion, the companies announced Friday morning. Citigroup in October had asked for a minimum of $1.9 billion for the recorded music business and $2.5 billion for EMI's smaller but more profitable publishing business.

Among EMI's roster of artists are Coldplay, Norah Jones, Katy Perry and Pink Floyd, to name just a few. In addition, its publishing catalog contains 1.4 million songs, including “New York New York,” “The James Bond Theme,” “Empire State of Mind,” “We Are the Champions,” “Wild Thing,” “Have Yourself a Merry Little Christmas.”

The deals are subject to approvals by antitrust regulators in both the U.S. and Europe. Universal is already the largest recorded music company in the world, with an estimated 27% of the global market, according to the International Federation of the Phonographic Industry. Adding EMI's share of roughly 9% would put Universal at a comfortable distance relative to Sony, whose market share has approached, and at times, surpassed Universal's with regard to recorded music.

The recorded music business is primarily concerned with selling records and breaking new artists, whereas music publishing collects royalties from music that is licensed for use in advertising, games, television shows and other commercial purposes.

For Sony, the agreement to buy EMI Publishing came at the eleventh hour, as financing for its $2.2-billion purchase came together in the last week or so via a network of partners that include Mubadala, an Abu Dhabi investment fund, Blackstone, Guggenheim Partners, UBS Investment Bank and several others. The offer narrowly edged out a $2.1 billion bid from BMG Chrysalis, a music publishing company owned by German media giant Bertelsmann and Kohlberg Kravis Roberts & Co.

Sony is considered an investor and partial owner in the deal, but will manage the business under its Sony ATV publishing business, which owns or administers the publishing rights to 750,000 songs, including the Beatles catalog.

The deal is a coup for Sony Chief Executive Howard Stringer, who has made music a priority for the company at a time when the industry has been ravaged by piracy and plummeting CD sales. In 2008, Stringer spent $1.2 billion to buy out Bertelsmann's 50% share in a joint venture, Sony BMG.

For Universal, the purchase keeps EMI out of the hands of Warner Music Group, which would have gained enough market share to closely rival Universal and Sony.

In the end, the deal hinged upon a solution to EMI's pension plan obligations to its 21,000 employees. Warner offered to assume the pension liability, but would pay about $1 billion in cash. Universal's $1.9 billion cash offer, however, left Citigroup with the pension obligations. Estimates for the amount of money necessary to pay out the pensions over the lifetme of the plan have ranged dramatically from $200 million to $600 million.

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-- Alex Pham

Photo: Among EMI's properties is the Capitol Records building in Hollywood. Credit: Alex Pham / Los Angeles Times.

EMI sale talks heat up as Citigroup plays bidders off each other

Norah Jones

Negotiations are heating up between Citigroup, the bank that owns EMI Group, and the companies that want to buy the music giant's assets, which include a catalog of 1.4 million songs and recording contracts with a number of chart-topping bands.

The bidders -- Sony Corp., BMG Chrysalis, Universal Music Group and Warner Music Group -- are positioning their best offers in what appears to be the final rounds of negotiations, according to several executives familiar with the talks.

Like a high-stakes game of musical chairs, the four companies are warily eyeing one another as they circle around the two major components of EMI that are up for sale: the recorded music division that represents major artists such as Coldplay and Norah Jones, and the less glamorous but more profitable publishing division.

Squaring up for the recorded music assets are Universal and Warner. Sony and BMG are vying for EMI's publishing business. In total, EMI could fetch more than $3 billion.

But a number of factors have held up the deal since bidders were asked to put in their proposals on Oct. 5. The biggest snag involves EMI's pension fund obligations to its 21,000 employees, the vast majority of whom work on the recorded music side of the business.

In particular, Citigroup and potential buyers have disagreed over how much money would be required to fulfill the company's pension obligations. Estimates differ dramatically, between $200 million to $600 million, according to several executives who declined to be named, citing the confidentiality of the discussions.

Universal Music, which bid $1.2 billion in cash for EMI's recorded music division, has proposed that the bank shoulder at least some of the costs for the pension. Warner Music offered to take full responsibility for the pension but would give Citigroup less cash -- about $1 billion, according to people knowledgeable about the talks.

Meanwhile, the sale of EMI's publishing business is also heating up. Earlier talks about Sony's difficulties securing $2 billion in financing appear to be exaggerated, as the Japanese media giant is now in deep discussions with Citigroup. BMG, once assumed to be the winner, is also in active negotiations. Each has bid about $2 billion.

Although EMI’s two divisions are to be sold separately, the pension fund covers both entities, and Citigroup wants it to be resolved before either part can change hands.

The New York bank could still decide at the last moment to pull EMI off the auction block or declare a rest interval if it can't whip deals into place, several people cautioned.

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-- Alex Pham

Photo: Norah Jones, an EMI artist, in 2007. Credit: Wally Skalij / Los Angeles Times

Jockeying goes on as Citigroup renews EMI talks with Universal

Coldplay

With negotiations for the sale of EMI Group dragging on longer than a Wagnerian opera, owner Citigroup Inc. has invited Universal Music Group back to the negotiating table this week after failing to break a logjam with the previous high bidder, Warner Music Group.

Citigroup's overtures to Universal come two months after the bank initiated a formal auction for EMI, one of the world's oldest and largest music companies, with a roster of well-known artists, including Pink Floyd, Coldplay and the Beatles.

Universal and Warner have been the lead bidders for EMI's recorded music unit. The bank has also fielded separate offers from Sony Corp. and BMG Chrysalis for the company's music publishing business, which itself could fetch as much as $2 billion. But a deal to sell the publishing division hinges on Citigroup being able to first sell the recorded music. 

But those efforts have has been fraught with difficulty, largely over how to deal with EMI's pension fund, which is said to cost as much as $600 million over the lifetime of the plan, according to executives who have knowledge of the discussions.

Officials from Citigroup and the music companies declined to comment.

Citigroup had been trying to work out the details of Warner's bid, said to be valued at more than $1.5 billion, said those executives who did not wish to be named because of the confidentiality of the talks.

Warner, owned by Russian-born industrialist Len Blavatnik, had outbid Universal's $1.2-billion offer, the sources said. But Warner walked away and withdrew its bid after failing to come to terms with Citigroup on the transaction, including how to handle a pension liability for EMI's 21,000 employees.

Warner's offer included an estimate for the pension costs, said people knowledgeable with the terms. As a result, the actual cash amount Warner offered could have been less than $1 billion.

A third bidder, billionaire Ron Perlman, has lobbed a bid valued somewhere between Warner's $1.5 billion and Universal's $1.2 billion offers, said people who have been briefed on the discussions. It's unclear where Perlman's proposal stands as Citigroup attempts to reignite talks with Universal this week.

If Citigroup is able to pull off its auction in the next few weeks, EMI would be the second major music company to be sold this year. In May, Blavatnik's Access Industries bought Warner Music for $3.3 billion in cash and debt.

A sale of EMI's recorded music business to either Warner or Universal would reduce the number of major music companies from four to three -- Universal, Warner and Sony Music Entertainment -- a scenario that could raise regulatory concerns in the U.S. and in the European Union.

But with no clear agreement in the wings, those interested in knowing EMI's fate may have to wait through a few more acts unfolding as Citigroup tries to coax more out of its bidders.

In February, Citigroup seized control of the British record company from former owner Terra Firma Capital Partners, in a debt-for-equity swap. In the same transaction, the bank wrote off two-thirds of EMI's loans, leaving the company with roughly $1.9 billion in debt.

 RELATED:

Citigroup puts EMI up for auction

An EMI merger may not raise antitrust concerns

Is Spotify investor Sean Parker and Ron Perlman interested in buying EMI?

-- Alex Pham

Photo: Chris Martin, lead singer of Coldplay, represented by EMI. Credit: Myung Chung / Los Angeles Times.

EMI bidders told to make best offer by Oct. 5

EMI Logo EMI Music's owner, Citigroup, has asked a select group of bidders to submit their best offers for the storied British music company by Oct. 5, according to executives familiar with the auction.

The bank, which took over EMI in February and formally put the company up for sale in June, has been entertaining preliminary bids from private equity firms, such as Platinum Equity, as well as other music companies, including Warner Music Group, Sony Corp., BMG Chrysalis and Universal Music Group. 

Some bidders, such as Warner and its new owner, Access Industries, are said to be interested in buying the entire company, but others want only parts of EMI, said people familiar with the process. Sony and BMG, for example, are primarily after EMI's publishing business, which represents songwriters such as Beyoncé, Alicia Keys and Kanye West. Meanwhile, Universal has its eye on EMI's recorded music division, whose labels represent artists including the Beatles, Katy Perry and Coldplay.

Citigroup, seeking to maximize the amount of cash it can get even if that means selling EMI in parts, has encouraged both types of bids.

EMI's publishing unit is smaller, but generally has been more profitable than the recorded music side of the business. EMI publishing accounted for 29% of the company's revenue but 45% of the company's total operating margin in its fiscal year ended March 2010, the last year in which its finances were publicly disclosed.  

Altogether, EMI could fetch well north of $3 billion and could surpass $3.5 billion, said executives familiar with the bids.

EMI, with its sale expected to wrap up before the end of the year, would be the second major music company to be sold this year, following Access Industries' acquisition of Warner in May for $3.3 billion in cash and debt.

An EMI sale to another major music company such as Warner, Universal or Sony would reduce the number of big record labels from four to three, down from six in the late 1990s.

RELATED: 

Musical Monopoly? An EMI sale might not raise anti-trust alarms

Citigroup puts EMI up for auction

Access Industries snaps up Warner for $3.3 billion

-- Alex Pham

Twitter/ @AlexPham

 

 

EMI wins some, loses some in case against MP3tunes

Michael-robertson-mp3 
A New York district court handed EMI Group a mixed verdict on Monday in its multi-year lawsuit against MP3tunes, a San Diego music locker service founded by controversial technology entrepreneur Michael Robertson. 

The lawsuit, filed in November 2007, contended that MP3tunes and Robertson personally violated copyright law when they allowed users to find music online and add songs to an online locker service that let them listen to those songs from any Internet connection.

MP3tunes argued that it qualified for a so-called safe harbor exemption under the Digital Millennium Copyright Act, which indemnifies select service providers from potentially illegal activities of their users.

The judge in the case, William H. Pauley, III, ruled that MP3tunes did qualify for safe harbor exemption when it responded to requests from EMI and other copyrightholders to ban links to sites known to distribute pirated music.

But the judge gave EMI a partial victory, saying that MP3tunes did not go far enough to enforce copyrights and that it also should have deleted the pirated songs from its users' accounts.

EMI, in a statement, suggested it was considering an appeal. "We're disappointed that the court found that MP3tunes was entitled to a safe harbor for some of its conduct under the DMCA. EMI believes that companies like MP3tunes, which knowingly build a business based on stolen music, should not be entitled to any DMCA safe harbor defense, and we're evaluating our options to seek review of those portions of the decision."

Robertson called the ruling a "victory for cloud music and MP3tunes' business model." He noted that the judge found that MP3tunes did not promote infringement.

"We've always operated our music service in a responsible manner, and because of that, the judge determined that MP3tunes has protection under the DMCA," Robertson said.

Still, Robertson and his company are on the hook for about 350 songs that it failed to delete after being notified by EMI and other copyright holders, down from 3,189 songs alleged in the EMI complaint. Each violation carries up to $30,000 in penalties, according to paidContent, making the ruling a potentially costly one.

ALSO:

Citigroup puts EMI up for sale

Universal Music Group expected to bid for EMI Group

Warner Music chief 'very pleased' with Spotify's U.S. launch

-- Alex Pham

Photo: MP3.com chief Michael Robertson. Credit: Reed Saxon / Associated Press

Universal Music Group expected to bid for EMI Group

EMI logo Universal Music Group is expected to be among the bidders for EMI Group, according to a person close to the label.

EMI's owner, Citigroup Inc., formally put the 114-year-old music company up for sale Thursday, opening a bidding process that's likely to take months.  

Universal, the largest of the four major record companies, avoided making a serious run at Warner Music Group when it was up for auction earlier this year, primarily because a merger of the two companies would have had trouble clearing antitrust hurdles in Europe and in the U.S., where Warner and Universal each have a double-digit market share.

But EMI is a different story. So far this year, its share of the U.S. recorded music market has been just under 9%, according to Nielsen Soundscan. Universal has had just under 30% of the market, while Warner's share has been 19%.

The thinking is that a Universal-EMI mashup would be an easier sell to regulators than a Universal-Warner deal, according to the knowledgeable person.

Will regulators necessarily agree? Looked at globally, EMI is not that far apart from Warner. EMI's worldwide market share hovers just under 10% while Warner is around 12%. And anytime the dominant player in the market makes a move, it's likely to be put under a microscope. 

That said, Universal could take a gamble, as it did when it purchased BMG's publishing business in 2006 for $2.1 billion and assumed most of the risk of making sure the deal passes regulatory muster.

This time, Universal is most interested in EMI's recorded music business, with a talent roster that includes Katy Perry, Beastie Boys and Lady Antebellum. But Universal could bid for the entire company, including EMI's publishing unit, which handles the songwriting rights for artists such as Jay-Z, Snoop Dogg and Gorillaz.

As with Warner, which fetched $3.3 billion from oil baron Len Blavatnik, EMI could attract similarly priced bids. EMI posted $2.6 billion in revenue in its fiscal year ended March 2010, according to its most recent publicly reported earnings release. Warner had just under $3 billion in annual revenue in its 2010 fiscal year ended in September.

Warner is also expected to make a bid for EMI once its own deal is complete sometime this summer.

EMI, Universal and Warner declined to comment on their plans.

-- Alex Pham

RELATED:

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Citigroup grabs control of EMI

Warner Music Group sold for $3.3 billion

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