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As the beleaguered music group and its Terra Firma owners continue in their last-ditch efforts to drum up the $190 million it will take to avoid default by the June 12 deadline, there are still many more questions than answers.
I.B. BAD: ALL HANDS ON DECK
Will Citi Wind Up With EMI? If So, What Will Parsons Do With It?
The ongoing EMI saga reached a fever pitch last week, as the company reportedly tried, and failed, to make a deal with rivals UMG and Sony Music, amid a flood of contradictory press coverage. As the beleaguered music group and its Terra Firma owners continue in their last-ditch efforts to drum up the $190 million it will take to avoid default by the June 12 deadline, there are still many more questions than answers.

Was Terra Firma attempting to forge a licensing agreement or a distribution deal with UMG and Sony Music? If it was a licensing deal, would EMI have to do the typical 50/50 split with the acts? Does it have the contractual right to license the recordings of the Beatles, Pink Floyd, Coldplay, Norah Jones and other key acts?

Was the deal being discussed for physical product only, or digital as well? Is it still possible that a deal could be made, and if so, with whom?

What, if anything, can Guy Hands reasonably expect to salvage from this debacle?

Does recently appointed EMI head Charles Allen have a sufficient understanding of the music business to handle the negotiations on such a complex matter? How any of these prospective deals would have impacted EMI’s infrastructure is still unknown.

Looking ahead, will Terra’s lawsuit against Citigroup have to be resolved before things can move forward, and how might it impact the eventual outcome?

If and when Citi gains control of EMI, it’s assumed that Dick Parsons’ experiences as head of Time Warner—and the seller of Warner Music—will cause him to be acutely aware of the critical need to keep the perceived and actual value of the company as high as possible in front of the expected eventual sale of assets.

But is it possible that Parsons might consider holding on to EMI? Some industry veterans, noting Parsons’ close relationship with Roger Ames during his time as WMG chief, are asking whether there might be a role for Ames in the post-Terra Firma EMI hierarchy.

If Citi sells the recorded-music assets to WMG, as is being widely speculated, the agreement will trigger another extended period of uncertainty, as the new owners go through a drill with which they’re painfully familiar: trying to get the deal through European and U.S. regulatory.

Ames, incidentally, was instrumental in getting approval from the EU of the Live Nation-Ticketmaster merger. He was unable to get the proposed 2000 merger of Warner and EMI through the gauntlet, but historians point the finger at Ken Berry, Ames’ EMI counterpart, for its failure.

Most believe that it will take more than a year, though probably less than two, from the initial agreement to the closing of the deal.

Meanwhile, against all odds, EMI continues to have a very good year, primarily behind its Capitol Nashville acts—resulting in new-release marketshare of 12.2% year-to-date, a mere half a percentage point behind the strangely quiet WMG.

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