Roger Faxon:Profile

By Paul Williams 9/25/10 Music Week

In a tumultuous year even for its standards, EMI has found itself replacing leaders and grabbing negative press with alarming regularity. But with EMI Publishing veteran Roger Faxon in the hotseat, the company can rely on a wealth of experience. Just don’t mention the word ‘vision’

Like Manchester City, EMI has been going through its managers at a terrifying pace.

A trio of different heads have ruled the UK major in quick succession already this year. And we are only three-quarters of the way through. Former Reckitt Benckiser executive Elio Leoni-Sceti disappeared faster than a kitchen stain under attack from a Cillit Bang gun, one-time ITV chief executive Charles Allen briefly followed and then Roger Faxon landed the group CEO job in June.

Leoni-Sceti had his admirers, thanks to the job he did in lifting EMI’s day-to-day financial numbers. Allen was not in the role long enough to make any such impact. But Faxon is a different prospect altogether. Unlike his two immediate predecessors, he brings to the table real music industry experience. He has been with EMI since 1994, a good chunk of that time on the publishing side. Prior to that he spent a number of years in the film and TV industries where, long before Guy Hands decided to become a latter-day Luke Skywalker fighting the “evil empire” of CitiGroup, he was executive vice president/COO for Lucasfilm.

Not yet three months into the job and Faxon has already made a big impact. He has just unveiled his vision for the music company and, while he is clearly satisfied with it, he could desperately do with another word other than “vision” to describe what he has set out.

“I so hate the word ‘vision’, but we have to use it. It sounds so pretentious,” says Faxon, who prefers the less-dynamic-sounding “state of understanding” to sum up what, in about 3,000 words, covers his views on everything from company philosophy to structural changes and how to take EMI forward.

Faxon clearly knows this business well, having most recently been chairman and CEO of the publishing division. But in writing the memo he did not just rely on his own thoughts gathered from his decade-and-a-half at EMI: he made a point of spending weeks on a global tour of the company to find out directly from the staff what they thought.

“When you start to think about how you are going to describe the business you’ve been asked to run, you dig into yourself and so a lot of that philosophy reflects the way I have felt for a long time, but I think the tour, if you will, showed these thoughts were not unique to me and they were pretty widely shared,” says Faxon, who found his memo was unhelpfully overshadowed in the financial press by CitiGroup which, the same day it was issued, filed a motion in New York to try to get a case brought against it by Terra Firma dismissed. This concerned claims the EMI owner had been tricked into buying the music company at an inflated price by the US bank.

In his findings Faxon concluded EMI was effective in many areas of operation. But as he began to write his memo he realised, “It has been a long time since EMI Music has been able to fully live up to its potential.”

What the CEO has inherited is a company that, in terms of its day-to-day operation, is heading in the right direction, if its last financial results are anything to go by. Pre-tax profits were up from £7m to £121m in the 12 months ending March this year and EBITDA rose 14% to £334m, but this progress is, of course, coupled with the bigger, more complex financial picture, with the company likely to have to find more cash in the coming months to meet its debt covenants.

However, it is the day-to-day business Faxon must concern himself with and here he is proposing a radical shift in the way EMI behaves, with market share and the quarterly financial numbers no longer its immediate focus.

“Being effective is delivering on the promise to our artists to help them succeed as much as possible. When you do that, all the other stuff, the quarterlies fill up and the profits come because you are focused on that; you carry yourself back to basics,” he says.

The artists are, naturally, a big theme in the memo and, just in case you were in any doubt, Faxon carefully makes a point of stating that the reason he went into the business in the first place was “because I love music and I wanted to be a part of an enterprise that helped the creators of that music achieve their goals and dreams”.

Where he suggests EMI comes into this is making the connection between the artist and fan. But to do this more successfully in the future he says the company must change the way it behaves and how it views itself. No longer should it see itself as a product company, focused around releases and “worked up” about units shipped and market share. He wants to see EMI described as a service company that works with and for its artists in partnership.

Ever since the Terra Firma takeover three years ago EMI has been trying to come to terms with how best it should be working with artists and their management, but Faxon acknowledges the major, along with the rest of the record business, has been grappling with how best to do this in an ever-changing market.

“I think all record businesses, and EMI has been no exception, have been struggling to operate within the environment of this new century, which is very unsettled, very uncertain, looking for more rights in a 360-degree relationship,” he says. “Every record company is going through that, including EMI. Our job is very clear. It is to make that connection [between artists and fans] and to extract the value. What we need in a relationship with our artists is to be able to manage the rights in relation to doing that.

“We can earn our ability to do other things if we see that we are creating value for artists, but first and foremost it is to take their recordings and bring as much opportunity as possible to those rights. But we may need other types of rights to make that work in this modern era.”

As you would expect, a good deal of Faxon’s thinking about the music business has been shaped by his time at EMI Music Publishing, whose continuing success as an industry powerhouse comes in stark contrast to the sister record business, especially in the US. Naturally, he believes the recorded division can learn many lessons from how the publishing operation behaves.

“When we talk about EMI Music Publishing what makes it a great business is the same as what makes a great record company: hugely talented songwriters that you represent, both those that came before, the catalogue, and those that are active today,” he says.

“What distinguishes us is having great judgement about who has the talent that can break through. The next step is how do you work inside that business to help ensure the success of talented people? There are lots of hugely talented people in the world who don’t achieve any success. They need a team behind them to help them find success. We learned at EMI Music Publishing that when we act as a team we are able to help our songwriters achieve greater success than they otherwise would have achieved.”

But, while Faxon emphasises the success of teamwork at publishing, he believes the structure he inherited for records makes it much harder for different parts of the business to pull together. In particular, he concluded the global business units, a key part of the new Terra Firma-owned EMI, were “barriers” to achieve such co-operation: they had to go.

While he concludes the units were “very good conceptions” and initially brought benefits, they had served their purpose.

“There are various streams of businesses in a company like this,” he says. “New music has its disciplines and way of operating. Catalogue needed to have far greater attention paid to it, developing a set of skills and understanding it desperately needed to have, and the services side of the business we tried to reconsider how we operate with the tools we have in support and what other elements we needed to add in to be more effective. All these things were hugely valuable and lots of innovation and achievement was made.

“The difficulty is that when you have business structures that are stiff, the co-operation across the borders is hard to achieve so they became rigid and isolating. New music is not that different from catalogue. Catalogue is just new music that is a little older. Music services are necessary to allow what you are trying to achieve in catalogue and new music. They all interact. They all have to work together.”

So out go the units and with them their respective and respected heads Nick Gatfield, Billy Mann, Ernesto Schmitt and Ronn Werre. In have come what have been christened “hubs”. The word has been chosen carefully, so avoiding calling them “regions” in case it could be construed EMI was reverting to a pre-Terra Firma structure. However, while there are plans for other hubs to be rolled out in the future, the first batch do follow regional lines, covering Europe Plus (UK, mainland Europe, Australia, Japan, Africa, Middle East, parts of Asia), Latin America and North America, the latter of which Faxon has decided to take direct charge of himself.

Faxon says the North American business, so long EMI’s bogeyman, has already been showing signs of improvements, with market share rising and some big breakthroughs such as Katy Perry and Lady Antebellum. But these two acts are still rare examples of US success for EMI, which continues to be a distant fourth in the market behind Universal, Sony and Warner.

Every incoming boss of EMI in recent times has had to address the age-old US performance problem and, despite achieving pockets of success, none has succeeded in turning things round.

Faxon himself believes there are “lots of reasons” to explain EMI’s long-time Stateside troubles. “In the current period there’s the difficulty obviously that the US market more than the UK market is moving very rapidly, with the physical world collapsing,” he says. “The digital world is not replacing that lost volume so it’s on the edge of change much more so than the UK, which is much more of a stable music environment. It has its own disruptions, don’t get me wrong, so one has to move at our own pace to understand that change and as we do that we become more successful. So there is a different reason today [about EMI’s US performance] than when I came here 16 years ago.”

If sorting out EMI’s US position were not challenging enough, he has also tasked the company with trying to simplify, speed up and make less expensive the deals it signs. This comes after a period when Terra Firma’s management had been keeping a very close eye on what was being spent, for what purpose and by whom.

“I think when a financially-focused owner comes in they are always concerned about, and rightly so, the financial risks that are being taken. A great deal of money, hundreds and hundreds of millions of pounds a year, is invested in artist development, releases, marketing, the creation of the recording, the music and so on and it’s a creative business and therefore there is risk in it,” he says.

“The business needed a greater sense of analysis, clarity about the deals being undertaken, but in the process of that the decision-making part of it slowed down. We’re a transactional business. To really get momentum you have to be able to act quickly with knowledge, with strong analytics, with support.”

He has also tasked his long-time publishing associate Leo Corbett, newly promoted to a group-wide COO role, to take a further look at working practices, including getting costs further under control.

All in all, then, it is quite some programme Faxon has set himself and his staff, but one he believes will ultimately result in a very different type of music company being developed.

“This business will have a more diversified revenue base. It will be leaner and more agile that it has been. It will be a business that will absolutely put the artist first and itself second. It will be a place where people will love to work, people who don’t fear for the future because they know they are making the future. It will be a business that loves music and yet sees it as something that is a mission,” he says.

“I don’t know what [the other majors] are going to do. If they do the same thing as we do that will be great in my view for music and for the people who create music. We are just going to do our thing and are pretty convinced it will be successful.”

Faxon knows it is not going to be easy. But since his tour round the company he says he has become even more optimistic about EMI’s potential.

“The thing that impressed me was the ability of the staff and their dedication to EMI and the artists we represent,” he says. “It’s a pretty impressive group of people so we have a tremendous marketing, sales and promotional teams around the world, particularly in the UK and US. We have some great artists and great A&R. There are lots of fantastic things in this business. It just needs to be knitted together better.”

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