EMI ushers in power shifts in music industry

By Andrew Edgecliffe-Johnson 11/07/11 Financial Times
Citigroup’s auction for EMI has been a test of a new line-up of industry executives and could lead to further personnel changes at the top of the music business.

At the start of this year, Doug Morris was running Vivendi’s Universal Music, Rolf Schmidt-Holtz was at the helm of Sony Music, Edgar Bronfman Jr was chairman and chief executive of a quoted Warner Music and Roger Faxon oversaw EMI Music and EMI Music Publishing. That has all changed, or is about to change.

For years, Warner Music’s courtship of EMI was seen as a personal pursuit by Mr Bronfman, who coveted the scale of the larger Universal and Sony. But Warner’s sale this year to Len Blavatnik’s Access Industries means Mr Bronfman is not calling the shots. Mr Bronfman said in August he would focus on the EMI deal as he handed the chief executive role to Stephen Cooper, but with no equity he is expected to move on.

Mr Cooper is a corporate turnround expert, interim executive and associate of Mr Blavatnik’s, who went into Enron after its scandals and is seen as having a talent for restructuring and cost-cutting but no wish to stay long in one company.

Universal, Warner’s main rival to buy EMI’s recorded music business, has been led since March by Lucian Grainge, the British former head of its international operations who took over from Mr Morris.

Industry members see Universal’s bidding tactics through the lens of the two men’s rivalry over market share.

The competition for EMI Music has been heightened by the presence of Ronald Perelman, the billionaire chairman of Macandrews & Forbes who has been known to play the drums alongside Jon Bon Jovi, but who is seen as unlikely to match the price an industry member with synergies can pay.

The battle for EMI Music Publishing has also shone a spotlight on the personalities involved. BMG Music Publishing, the front-runner, is a joint venture between Bertelsmann and Kohlberg Kravis Roberts led by Hartwig Masuch, a low-key former band member who has quietly gained scale through the acquisitions of mid-sized rightsholders including Bug Music, Cherry Lane and Chrysalis.

BMG’s chances have been helped by the appointment of Thomas Rabe as chief executive officer of Bertelsmann, industry members believe, as the disciplined but aggressive former chief financial officer designed the BMG partnership with KKR.

Mr Masuch and Mr Rabe are going up against Marty Bandier and Rob Wiesenthal at Sony. Much of the focus has been on Mr Bandier, the former EMI Music Publishing CEO who runs Sony ATV, the Japanese electronics group’s publishing joint venture with Michael Jackson’s estate and remains attached to his old portfolio of songs.

However, Mr Wiesenthal, chief financial officer of Sony Corporation of America and chief strategy officer of Sony Entertainment, has the task of pulling together the complex financing needed to pull a deal together in tough credit markets.

A break-up of EMI would also leave a question mark over Mr Faxon, who in November 2010 said splitting the company in two “simply would not work”, playing down the likelihood that EMI would be sold to a rival.

None of its competitors was having an easy time, he noted, “and having been involved in the doomed merger of EMI and Warner Music in 2000, I can tell you there is no easy route through those issues

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