I.B. BAD ON EMI’S TAKEOVER BY MUSIC BIZ OUTSIDERS
When he bought EMI, Hands inherited an accomplished gunslinger in Roger Ames, but instead of putting him in a decision-making position, the Terra Firma boss incomprehensively moved him out of the way, not only installing consumer products executive Elio Leoni-Sceti to head up the company, but also surrounding him with numerous other outsiders—moves that, not surprisingly, were greeted with skepticism around the industry.
Virtually every successful record company has been headed by a gifted and knowledgeable record man—pros like Doug Morris, Clive Davis, Jimmy Iovine, L.A. Reid, Barry Weiss, Lyor Cohen, Rob Stringer and Ames himself during his stints heading PolyGram and Warner Music. What these executives have in common are good ears, a nose for talent, street smarts and marketeering expertise.
Some of these power players learned the ropes in label mailrooms and promotion outposts; others started out as managers, indie label entrepreneurs, producers, artists, songwriters and even entertainment lawyers. To paraphrase Malcolm Gladwell, it takes a good deal more than 10,000 hours—or at least 10 years—on the job to accumulate and hone the necessary skill sets. By the end of their apprenticeships, these rare individuals have acquired the ability to combine creativity and business acumen, enabling them to decisively orchestrate every aspect of their business model.
By the same token, non-record men have been abject failures in their attempts to do this complex job. The list of failures includes such infamous figures as Robert Morgado, Michael Fuchs, Jim Fifield, Eric Nicoli, Strauss Zelnick and Andy Lack.
This brings us to Hands’ second critical misstep: the separation of A&R and marketing in the restructuring of EMI Music. This radical move effectively resulted in the neutering of Nick Gatfield, an A&R-savvy label head who’d compiled a sterling track record at Island U.K. There’s no telling how EMI Music would’ve fared had Gatfield been given greater responsibility—and/or if he’d set up shop in the
While Charles Allen, Leoni-Sceti’s successor, comes from the TV industry, as Lack did, he has been credited for shepherding musical reality shows like X Factor and Britain’s Got Talent while running ITV. Will he be able to apply his experience on the creative side of TV to overseeing the company? Allen is a U.K. player who knows his way around Parliament, regulatory and cost-cutting, and his experience in these areas may well come in handy as Terra Firma runs through its dwindling options with D (for default) Day approaching.
When the news of Allen’s appointment spread around the industry two weeks ago, one rival executive quipped, “The only Allen who can save EMI now is Paul Allen.”
The strategy Terra recently attempted to work out with UMG—doing licensing deals for its catalog and currents as a way to raise an estimated $600m over the next five years—is strikingly similar to the long-term concept put forth by a Wall Street player, which we mentioned in the previous column. What isn’t known is whether digital was part of the negotiation.
This leads to some intriguing questions, to say the least: If EMI were to make a deal a currents-and-catalog deal for physical and digital, what would be left of the company? What would happen to EMI’s current artist roster and employees, who would presumably have little or nothing to do with everything farmed out? And now, with UMG presumably out, is Sony still trying to make that deal? While such a deal could still go down with another major, the high valuation the competition has placed on the EMI catalog may have convinced Hands to double down on his bet. But Terra now appears to have no choice but to come up with the needed $180m payment to Citigroup itself.
