Roger Faxon: A manager of creative disruption

Andrew Edgecliffe-Johnson 02/03/13 Financial Times

Roger Faxon tugs on a pulley to take an eccentric old elevator up to the Tribeca loft apartment he moved into last month after stepping down as chief executive of EMI. He has not had time to hang all his contemporary art, but his tall, 13-year-old poodle looks settled in, and orchids and a plate of biscuits are arranged neatly on a long wooden table. “I learnt about always having cookies from working with the British,” he says.

It seems civilised and calm after 18 years at the company behind The Beatles and Katy Perry, which ended in September with the sale of EMI’s record labels to Universal Music.

When Jim Fifield, the former head of EMI’s recorded music business – known as Lucky Jim, thanks to the generous bonuses he was paid – suggested in 1994 that Mr Faxon should join EMI to run business development, he said music was “the easiest business in the world”, Mr Faxon recalls. Instead, the following years put Mr Faxon through a crash course in managing disruption.

Mr Faxon had looked up his old contact when seeking to leave the auction house Soth­eby’s after a gruelling re­structuring job. EMI, by contrast, had experienced a decade of rising profits thanks to the CD, the Walkman, retail mega­stores and global expansion. Mr Faxon says that in 1994 he had “been beating my brains out” trying to reorganise Sotheby’s, and that EMI “sound­ed like nirvana”.

Within a few years, however, EMI was battling digital piracy, Napster’s file-sharing and regulators who refused to let it merge with a rival. By 2002, when Mr Faxon became finance director, it was on the day of one of many profit warnings, and “the business was in financial free fall”.

EMI’s last five years before being broken up and sold were spent labouring under debts in­curred in Guy Hands’ 2007 buyout, and then in the hands of Citigroup, his lender. Mr Faxon was one of the few constants at EMI and has taken time to reflect on the lessons of those years.

One of the biggest, he says, is that because music executives re­lied on retail and radio intermediaries to tell them what consumers liked, they failed to understand how customer behaviour was changing – and to change products and services accordingly. “How many times,” he says, “have you tried to open a CD and said ‘who in God’s name designed this?’ ”

Irritating consumers with fiddly casing is nothing compared to suing them, however. The industry’s battles with Napster users are now seen as its cardinal blunder in the digital era. But within the music companies, Mr Faxon says, they seemed logical. After a legal victory against MP3.com in 2000, the industry felt it was winning. “The reality is that the consumer was changing, and the guy who understood that was Steve Jobs.”

Piracy, file-sharing and iTunes broke the industry’s ability to make profits through controlling distribution. This triggered successive restructurings – each one “less and less thoughtful and more and more driven by just panic”.

Even before Mr Hands’ buyout six years ago, EMI still saw itself as a big company rather than recognising the need to reinvent itself as a more nimble competitor. And even before interest charges on its buyout debt outstripped earnings, maintaining the high dividends of a previous era sapped the company’s cash.

Mr Faxon says he had a good relationship with Mr Hands, who, after running EMI himself and trying out two CEOs, put him in charge. But he adds: “The leverage that was put on the business was unconscionable. It was unrealistic even with the best of strategies.” He says Mr Hands is “always working on options, always looking for different answers and never comfortable until he’s explored every possibility”.

As those options ran out, Mr Faxon spent much of his time urging people to distinguish between its woeful capital structure and its improving operating performance.

As CEO, he scrapped a predecessor’s reporting structure that left EMI “constantly in a process of evaluation”, but his own big strategic move was un­wound by its break-up. In 2010 he decided EMI must become a “global rights management” company, ending the traditional split between recorded music and music publishing. Some rivals doubted the strategy, but Mr Faxon says sharing knowledge across divisions proved its value.

“The shining light in this thing is that [EMI] decided to really take seriously understanding the consumer,” he says. Its consumer insight team helped launch hits from artists including Lady Antebellum, David Guetta and Tinie Tempah, but most media companies are still “light years away” from truly understanding the insights that data analytics offers.

Mr Faxon did not go through classic management training or follow a career plan. With a degree in int­er­national relations and economics, he passed up Harvard Law School for a job in shipping that involved troubleshooting when a crew mutinied or a captain refused to pay a bribe. Instead of Harvard Business School, he chose a New York redevelopment organisation before moving on to the Congressional Budget Office. After working with Washington heavyweights such as Jack Lew, then a political aide and now Treasury secretary nominee, Mr Faxon stumbled into the media sector.

Asked to organise film director George Lucas’s investments, the task turned into a job that included overseeing actors’ contracts on movies such as Raiders of the Lost Ark. “I wouldn’t mind hanging out with Harrison Ford, but what I really did like doing was figuring out how to make the business work so Harrison could get another job,” Mr Faxon says. He caught the film bug and co-founded a production company that made Bull Durham, Tequila Sunrise and Frantic. Stints at TriStar and Columbia Pictures followed.

. . .

Mr Faxon portrays each step on the winding road to EMI in similar terms: as a knotty restructuring job needing both a firm financial focus and a sensitivity to creative talent. “How do you maintain the discipline in a way that doesn’t stifle the creativity? That’s the secret of running a creative business,” he says.

He has not decided what to do next. He is on the board of Johns Hopkins University, his alma mater, helping it look at massive open online courses (Moocs) and the digital revolution in higher education, and rec­ently became a director of ITV. The UK broadcaster approached him for his experience of media, the US market, “the travails of digital” and regulatory issues, he says.

He ducks suggestions that he might take another big music industry role, saying: “I’m just interested in getting a really juicy, interesting set of issues to get my hands around.”

Mr Faxon has not lost his appetite for disruption.

The CV

● Born: 1948
● Education: BA in international relations and economics from Johns Hopkins University
● Career: Early roles in a shipping company, Bedford Stuyvesant Restoration Corporation, Congressional Budget Office and House Budget Committee
● 1980-84: Executive vice-president, then chief operating officer at Lucasfilm
● 1984-86: Co-founds Mount Company, a film and TV production firm
● 1986-90: Executive at TriStar, then senior executive vice-president of Columbia Pictures
● 1990-94: COO of Sotheby’s North America, then chief executive of Sotheby’s Europe
● 1994-02: Joined EMI to run business development and strategy
● 2002-05: chief financial officer
● 2005-09: COO, then co-CEO, then chairman and CEO of EMI Music Publishing
● 2009-12: CEO of EMI
● Interests: Skiing, coaching daughter’s football team, reading

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