News Column

You Like Coldplay? Record Label Accountants Ask

Sept. 24, 2012

Jon Rees

Coldplay

Lucian Grainge, the Clash-loving Arsenal fan from north London who runs the world's biggest music company, promised he would save EMI. But last Friday that boast was looking distinctly hollow. He had been told he must jettison artists such as Coldplay, David Bowie and Pink Floyd as part of the pounds sterling 1.2 billion deal to secure the UK music firm.

Grainge, chairman and chief executive of Universal Music, owned by France's Vivendi, swore when this deal was first announced last year that "as an Englishman EMI artists and their music provided the soundtrack to my teenage years."

But the European Commission had other ideas and last Friday ordered Grainge, 52, to sell some of the most popular acts in the EMI repertoire before it approved the deal.

Grainge had already handed over the bulk of the pounds sterling 1.2 billion to its previous owner Citigroup before he knew what he would have to sell.

"Is this deal worth it? You bet," he said. "This deal has now been cleared in the three biggest music markets in the world -- America, Japan and Germany. I am leading a business that now owns Capitol Music and the Abbey Road Studio as well as the EMI and Virgin labels."

His predecessor at Universal, Doug Morris, who is now his rival as head of the other leading music firm Sony, said of Grainge that "behind those little glasses and that kind face he is actually a killer shark." Grainge's tone when it is suggested that the deal was not quite worth it shows that Morris had a point.

Grainge now adds artists including Robbie Williams, the Beach Boys, Katy Perry, Norah Jones, Emeli Sande, Phil Collins and Peter Gabriel to his stable. And The Beatles. The deal will come at a price for EMI staff, however.

"We intend to generate cost savings of pounds sterling 100 million," he said. "There will be job losses. I can only grow this business by making savings and investing in the product -- the artists and the music.

"But we are creative people and we know how to work with creative people. We know what we're doing."

That is what smaller music firms fear. Impala, which represents independent record producers, said the EC's decision to approve the deal means 'artists and consumers will ultimately pay the price."

Grainge intends to have EMI's Capitol label and its Virgin label spearhead his drive around the world. "There will be more music released on these two labels and we will sign domestic artists to them," he said in a dig at EMI's previous owner, the venture capitalist Guy Hands, who appeared to many in the industry to have little interest in new artists.

Grainge is as different as you can get from Hands, who bought EMI at the top of the market in 2007 for pounds sterling 4.2 billion before having it seized by US investment bank Citigroup for not meeting the terms of its pounds sterling 2 billion loan. Grainge left school at 18 and began work as a runner at a talent scout company before phoning every boss in the Music Week directory to ask for work. Maurice Oberstein, chairman of CBS, took his call and hired him as an A&R -- artists and repertoire -- man. His first signing was the Psychedelic Furs. He set up Polygram Music Publishing in 1986, enjoyed success with Boyzone and became chairman of Universal in Britain in 2005 before taking over as boss of the whole company in 2011.

Buying EMI was a bold move for Grainge, especially as his parent company was burdened by debt and facing calls to be broken up.

Can he make it work in a market that has suffered probably like no other through the transformational effects of the internet? A survey last week showed Britain is second in the world when it comes to downloading music illegally. "I refuse to accept the continual decline of the music industry," he said. 'This deal is about creating growth, to stabilise the business and to make a courageous investment in our future."

Grainge can claim more credit than many in the music industry in adapting to the changes digital music has brought, signing deals with Apple, music-streaming service Spotify, BSkyB, Virgin Radio and Vodafone. He has invested pounds sterling 500 million in various digital ventures. "That is hard cash that needs hit artists to generate it," he said.

"Legal digital music versus piracy five years ago is a different business from where it is now. The moves against Pirate Bay and Megaupload have had an effect.

"This is about the future of music, it is a bet on what the future will be -- on how music collides with technology in markets and on platforms that have never existed before.

"We are the glutinous thing that runs through all the technology. Without music, there's nothing."

Grainge's new home is in Los Angeles, but he still follows Arsenal. He confessed to a little pre-match tension ahead of today's game with Manchester City. That must be nothing compared with proving that pounds sterling 1.2 billion was money well spent.



Source: (c)2012 Daily Mail (London). Distributed by MCT Information Services.