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Talks were initiated by EMI rulers Levy and Munns after they’d listened to the completed Korn album, the quality and potential of which compelled them to enter into this intricate, mathematically complex partner-ship with the band.
I.B. BAD ON KORN-EMI:
THE REAL DEAL
The Intricacies of the New Partnership,
From the Horse’s Mouth
The partnership between Korn and EMI Music is most accurately described as a $25 million investment by EMI in a new company that is “in the Korn business,” according to one familiar with the negotiations. Thus, rather than shelling out an advance to the band, as would happen in the traditional artist-label relationship, EMI will function as a profit participant in the band’s business for two LPs and their accompanying cycles. The arrangement is characterized by insiders as a series of separate deals from the various revenue streams that live within the context of the new Korn partnership. 

The challenge facing the two parties, says one in the know, was to find a way to align the interests of the label with those of the artist, so that the decisions made would ultimately benefit both parties. The concept behind this arrangement, the same source clarifies, was to make the pie bigger for everyone, so that the artists and their partners both make money.

The chief negotiators of the deal were band attorney Gary Stiffelman, who is co-counsel to Korn, along with John Branca (both are with Ziffren, Brittenham, Branca & Fischer) and EMI business affairs exec Ian Hanson. Significantly, it was initiated by EMI rulers Levy and Munns after they’d listened to the completed Korn album, the quality and potential of which compelled them to enter into this intricate, mathematically complex partnership with the band.

Korn manager Jeff Kwatinetz had been talking about this sort of arrangement for the last several years, finally locating a willing partner in Levy and Munns. They in turn had a comfort zone with the template, inasmuch as EMI had previously entered into a nontraditional deal with Robbie Williams. While the two arrangements aren’t identical, they have certain similar elements, and EMI is said to be satisfied with the results of the Williams deal, according to a source within the company. Kwatinetz's stock with his bankers and music-biz power players will receive a tremendous up-tick if the deal works for both parties.

EMI's minority participation in the new company is said to be around 30%, says a person close to the negotiations, who adds that revenue streams will be calculated on either net or gross, depending on the nature of the stream. For example, touring, with its heavy overhead and costs, will probably be calculated on a net return, while other streams such as merchandising or film/TV licensing deals would logically be worked out on gross returns.

Before the ink was dry on the agreement, the new Korn/EMI partnership made a licensing deal with Virgin Records, which will recapture its distribution and marketing costs and return all the profits to the new company. Profits from other revenue sources (e.g., publishing and touring) will also be returned to the new company.

As the majority partner, Korn has greater control over the brand than does EMI. With that assumption in mind, competitors are trying to spin the partnership as risky to EMI by asking, "What happens if Korn decides to stay home and not tour?" In that event, the deal provides remedies for EMI, which will enable the company to protect its downside risk.

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