Quantcast
"There isn’t an industry in the world that can ignore the environment in which it’s operating. That’s a luxury the music industry has had since 1940. I’m old enough to have been there in the CD wars and remember how difficult it was to get people in the industry to accept it. This industry has been totally focused inward and has not paid any attention outward."
BACK IN THE SADDLE
An Exclusive HITS Dialogue With EMI Recorded Music Worldwide Chairman/CEO Alain Levy

Could the second time be the charm?

Having already built one major conglom into what was once the largest music company in the world, Alain Levy was ripe for the picking when EMI needed to make a change at its highest level.

The British giant has been sputtering in the U.S. for 20 years, and EMI Group Chairman Eric Nicoli needed to shake things up as revenues and marketshare worldwide continued to dip. In its most recent report released last week, EMI Recorded Music suffered an 8.9% sales decline, generating an operating loss of $11.6 million.

Under former Recorded Music Worldwide Chairman/CEO Ken Berry, the British company experienced some hard times. The well-liked executive’s departure came after a four-year run atop EMI. During that time, the company went through two failed merger attempts (with WMG and BMG), wavering stock prices at parent EMI Group and the well-publicized misadventures of his ex-wife, Virgin Music Group Worldwide Vice Chairman Nancy Berry.

Among Berry’s last moves were the naming of Andy Slater as President/CEO of flagship label Capitol Records and the folding of Priority Records into Capitol. Enter former PolyGram Chairman/CEO Levy. An experienced music veteran, Levy was given the reins of EMI a month ago. Joining him as Vice Chairman was David Munns, a onetime Senior VP of Pop Marketing worldwide at PolyGram, EMI veteran and manager for Bon Jovi.

"No other job is as attractive as this in a time of enormous change and challenge for the music industry," Levy said.

He ain’t just whistling Dixie. Levy and Munns re-enter the biz in the midst of one of its worst slumps ever, with no discernable trends on the horizon and declining sales.

Before joining EMI, Levy was President/CEO of PolyGram until the company was purchased by Universal Music Group in 1998. He left after choosing not to be part of the management of Universal, having almost quadrupled PolyGram’s stock price from $16 to $57 while running the show.

Levy and Munns were instrumental in growing PolyGram’s share of the global record market from 12.5% to 17.5%, taking it from No. 3 to No. 1, while its total market capitalization grew from $2.5 billion to $10.4 billion. Together, they developed the careers of some of the world’s biggest-selling artists, including Bryan Adams, Bon Jovi, Boyz II Men, Sheryl Crow, Elton John, Andrew Lloyd Webber, Luciano Pavarotti, Sting, Shania Twain, Van Morrison and U2.

What’s next? Levy takes time out from a marathon Jerry Lewis viewing session to talk with HITS’ own cinderfella, Marc "Hey Ladeeees" Pollack about the current state of the business, his label heads, the online distribution of music and more.

The record industry is in a pretty serious slump these days. How would you describe what’s going on?
I would say the industry is nervous and anxious.

Is the business still about hit singles and hit albums?
I don’t know if the business has ever been about hit singles and hit albums. It’s about breaking acts and establishing acts.

Can the industry find its way out of this down period?
Absolutely. I wouldn’t have taken this job otherwise. There isn’t an industry in the world that can ignore the environment in which it’s operating. That’s a luxury the music industry has had since 1940. I’m old enough to have been there in the CD wars and remember how difficult it was to get people in the industry to accept it. This industry has been totally focused inward and has not paid any attention outward.

Where do you think the Internet and the digital distribution of music fits into the overall revenue stream of a major music group?
For the time being, it’s providing negative revenue, and that’s because of piracy and illegal file-swapping. Certainly, one of the major tasks of the industry is to solve that problem. Then you will see positive revenue, because it will create new ways of distribution. But we’ll have to be patient; it won’t be solved overnight. What I’m even more interested in is seeing the industry evolve beyond that. Technology changes constantly, and the music business will have to change with it.

We, as an industry, must rethink our ways of operating, taking into account technology. For example, downloading just for the sake of downloading will not be a very big business, in my opinion. Knowing how to attractively package downloads will be a very big business—both in terms of a subscription model and immediate downloads. An analogy is MTV. As a collection of videos being played one behind the other, it’s very boring. But they did a wonderful job at evolving from that and becoming something much more sophisticated through packaging. And the same is true for music.

Can you put a time frame on this evolution?
Well, we are responsible for how soon it arrives. But the attitude of being totally passive vis-a-vis technology is extremely dangerous. We must be proactive.

How does the music industry recover?
Easier said than done. The industry has not really been creating worldwide stars. Rather, it’s made music into a kind of commodity: the three-minute single. That’s dangerous because what people are really interested in are stars. The only one that I could really see over the last three years has been Britney Spears. She has the magic of being more than simply a nice sound. If you take the analogy of the movie business, when you have blockbusters, people go to the movies. Same for the music business. You know what’s frightening? Compilations. The industry loves them, but it’s frightening to see how many of them kids are buying. It’s great from a business point of view, but it’s not a good sign for the music industry.

Is the emphasis on first-week sales figures a negative for the music business?
I think you have two markets: one for immediate successes and the other for building long-term artists. Again, we have to adapt. The consumer is telling us that he does like the immediate aspect of music, almost as a commodity. That’s your first-week sales aspect. But there’s a much wider demographic out there that has an interest in stars. I think we have to be in both markets. But based on the current economies of most record labels, the philosophy has increasingly become, "We don’t care what you sell as long as you sell. We don’t care where it comes from, as long as you achieve your quarterly results."

What was the mandate given to you by Eric Nicoli?
He expects David [Munns] and I to provide leadership and a vision.

And what does that mean for you?
Two things: creating a team and implementing shared values on a worldwide basis.

The U.S. market has traditionally been a tough grab for EMI over the course of the last two decades. How do you plan on attacking that?
There’s no specific plan in play at the moment, except to try to cut out the things in the organization that were very expensive, not profitable or losing money. Cut out the big losses and rebuild from there. David has gone to the U.S. recently to assess the situation. What I do know is that: (a) The U.S. represents 38% of the world market, and (b) Mistakes are very expensive, and when you make them, you have to be very careful and react quickly to rectify them. I also know that there are very few top-notch executives around in the American record business. So the process will certainly not be a quick one—I don’t have a quick fix. I’ve had some experience in the past of trying to do things too quickly and having them go horribly wrong. I lived in the U.S. for 10 years, basically running PolyGram’s American companies, so I’m still a little bit sore.

Speaking of the executive talent that is out there, are you going to give the current team a shot to turn things around?
We’re going to evaluate the current team, and they’re going to evaluate us. And at the end of that process, we’ll decide.

How do you begin to turn things around?
You have to look at marketshare. What’s a plus for us in a bit of a silly way is that the U.S. market is not as important as it was, say, 10 years ago, in generating worldwide stars. We plan on spending a great deal of time trying to change that—creating our own worldwide stars. Previously, the U.S. market was, say, 38% of the world market, but in fact, if you looked at American music, it was closer to 50–60%. That’s not true anymore. America’s relative importance has diminished, especially for a company like EMI—we’re so strong outside the U.S. If we have a North American operation which is profitable, it buys us some time. But ultimately, we have to be a player, and I don’t consider us a player right now. We have to find, groom and grow people—it’s a people game. I have to do it without feeling there’s a gun to my head. I can’t think, "If I don’t have this solved in six months, I should resign." Again, mistakes in the U.S. are extremely expensive.

Is there any music in the EMI pipeline that you’re particularly excited about?
I don’t know yet. I’m going to be listening to music soon. [Laughs] I have to buy a new record player.

You may need a new needle.
Exactly. We’re visiting America next week, and then we’re embarking on a worldwide tour. And a big part of it is listening to music and seeing where each of the territories is positioned in terms of music. You learn a great deal by seeing what people find and what they make out of it. If you have an A&R guy with 10 things that look like something, that’s good.

Before Ken Berry left, he said he was entertaining the idea of getting out of distribution and manufacturing. How do you feel about that?
We’re pursuing that. This is something we will do. Compared to other issues we have, it’s frankly not crucial. But yes, we will pursue this plan at a future time. Right now, my main agenda is to build a team. In this day and age, a record company has no business being in manufacturing—it’s totally obsolete. That’s what I’ve been saying about record companies and technology. Nobody in the semi-conductor industry would think that having factories is important; it’s the design that’s key. But we have not realized that. We, as an industry, continue having factories everywhere. We’re totally inefficient in that area. Even if you save one penny, though, that alone won’t make you a good record company. The same could be said for distribution. You can probably save a point or two—and I don’t spit on that—but I have bigger issues to resolve.

When you were outside the major label groups over the course of the last few years, did you watch what was going on?
Yes, but more on the technology than the record side—stuff like the impact of broadband. It’s quite amazing, when you’re outside of the industry, how you tend to lose interest. I’m looking at MTV in a totally different way than I did months ago.

Which of your competitors do you admire most?
All of them. I think [Universal Music Group CEO] Doug [Morris] has done a fantastic job.

What do you see yourself doing five years from now? And where do you see EMI in that time?
If all goes well, I see myself re-signing for another five years, since I would have had so much fun running EMI that I’d want to stay here. If we are successful, EMI has to be the best record company in the world. And by best, I mean a friendly environment for artists and executives. It has to have great profitability and great marketshare. Not the biggest, because I think that probably would be too ambitious. I’m not a marketshare-for-the-sake-of-marketshare man. But I think I have a concept of what the best record company should be. You know, I’ve now had 25 years of experience at three companies. I have a pretty good idea what works best.

There was talk that part of the reason that you were brought in was to streamline EMI for a possible sale.
Well, first of all, I’ve learned from experience that you can never say a company is not for sale. But I don’t care about that. We have to focus on building this company. Nobody in this world can say that over the next five years they won’t be for sale—or sold.

Over the course of your career, what’s the one deal or the one hiring you wish you would have made?
I probably would have named Doug Morris as CEO of PolyGram U.S. But I listened to my guys, who were afraid of Doug coming in as their boss, and didn’t do it.

If you were starting a record company today, who would be your top three executive picks?
David Munns, David Munns and David Munns.

COUNTRY'S NEW KING
The Gospel of Luke (11/11a)
BIEBER BY CHRISTMAS?
How's that for a tease, Bieber Nation? (11/12a)
NEAR TRUTHS: MEET
THE NEW BOSSES
Not the same as the old bosses (11/11a)
CMA CENTERPIECE
CARRIE UNDERWOOD
This sure feels like her moment. (11/11a)
A TASTE OF RAINMAKERS II:
SARAH TRAHERN
It's a marathon, not a sprint. (11/11a)
BEHIND THE SCENES WITH KANYE
And lo, there was much earned media.
MOE, MARSHMELLO AND MONEY
The story of a "faceless" brand that got very, very big.
THE NEW WORLD OF A&R
The trap they all fell into.
GRAMMY NOMS
Who deserves consideration in the genre categories?
 Email

 First Name

 Last Name

 Company

 Country
CAPTCHA code
Captcha: (type the characters above)