REMAKE/REMODEL: I.B. BAD ON THE POSSIBLE FUTURES OF EMI

Many in the business, including a number of rival label executives, dismiss Lucian Grainge’s vow on 11/11 to restore EMI to its former glory as mere posturing. But according to Universal insiders, Grainge was revealing his actual plan for the revitalization of the company, formulated prior to making the initial bid to Citigroup. UMG’s spin is that EMI is a distressed asset, likening the company to a crumbling mansion following years of neglect, which the Universal ruler intends to renovate from top to bottom. Grainge intends to transform EMI into a series of viable revenue-producing centers, so that Capitol, for example, might join Interscope as UMG’s second West Coast label, with its own completely rebuilt A&R and marketing departments. That would be consistent with Grainge’s A&R buildup throughout Universal itself, cutting the fat to generate cost savings, and putting those savings into building A&R muscle, whereas Guy Hands cut away the muscle along with the fat to achieve his cost savings… As for the key players, the jury is still out on company head Roger Faxon, whose golden parachute is believed to be worth around $8m, but his chances of staying on at recorded music once the deal is finalized are slim, although they’re greater than his getting a job with Sony/ATV’s Marty Bandier, whom Faxon replaced at EMI Music Publishing in 2002; Bandier and Faxon’s relationship is said to be tenuous at best. A reunion of Bandier and former EMP executive and now EMI A&R topper Dan McCarroll is possible, though his relationship with fellow EMP alum Jody Gerson, who is Co-President of the pubco with Danny Strick, is said to be less than collegial. Big Jon Platt’s career, like that of McCarroll’s, blossomed while he worked under Bandier at EMP. Both Platt and McCarroll are respected players in the creative community. Will Bandier want both back?... Industry observers are applauding Bandier for the shrewdness of the deal he helped orchestrate, bringing in investors to finance it, and making it administrative in nature, which will throw off major revenue for Sony/ATV while continuing to build the asset at a time when Sony Corp. is not a cash-rich company… On the records side, EMI’s marketing and promotion effort under the highly regarded Greg Thompson has been impressive, especially considering the huge disadvantages the company has faced, while he also has excellent relationships with Katy Perry, Coldplay, Thirty Seconds to Mars and David Guetta, all of which would seem to put him in a favorable position moving forward. Also putting points on the board at the right moment is Capitol Nashville chief Mike Dungan, one of Music City’s most respected executives and an A&R force on the country side... While he develops his plan for EMI, Grainge continues to build his stable of experienced executives within Universal, as former Sony Music chieftain Don Ienner arrives wrapped in a consultancy deal. Before he left Sony, UMG East Coast topper Barry Weiss signed the Ienner-managed Hot Chelle Rae, whose “Tonight, Tonight” was a Top 40 smash. Ienner joins fellow former major-label heads Tom Whalley and Jason Flom, both of whom are currently operating within Monte Lipman’s Universal Republic. Flom—who is having a major success in the U.K. with Jessie J and has sold nearly 1.5m of her “Price Tag” single in the U.S.—has a history at EMI, having signed and developed Katy Perry. This could conceivably make him a candidate for some involvement with the retooled company. And Whalley, who spent several years at Interscope and the rock-centric Warner Bros. Records, is believed to already be looking for a bigger palate to paint with… But UMG is facing one enormous issue as the company attempts to get regulatory approval for the acquisition: the companies’ combined marketshare—a key point of contention in IMPALA and Beggars head Martin Mills’ aggressive attacks on the proposed merger. In Europe, Universal and EMI have long been the more successful majors, and this trend continues. In France, UMG has averaged 38.3% over the last three years, to EMI’s 15.3%, for a whopping combined total of 53.6%. EMI has enjoyed decades of success in the U.K., and the company has managed to average 16.4% even through the disastrous mismanagement of the Hands regime. UMG’s British share has averaged 31.4%, putting the combined share at 47.8%. But UMG owner Vivendi is based in France, one of the EU’s biggest players; does it have the leverage to overcome these obstacles?... It’s worth noting that Universal’s era of dominance on both sides of the Atlantic was generated and presided over by Doug Morris. If this merger is approved, Morris will then be the head of the world’s second biggest music company. Morris is said to be extremely bullish on his creative executive teams, led by L.A. Reid, Rob Stringer and Steve Barnett, Peter Edge and Tom Corson, Dr. Luke, and the always-dangerous Simon Cowell. Both Morris and Grainge have been collectors of executive talent throughout their careers, and that is as true now as it ever was… The final big question surrounding the events of 11/11 is, what happens to Warner Music now? Insiders say talks are taking place at the highest level between Sony and WMG, reportedly about a possible distribution deal. Could it lead to an even deeper involvement in the future? Meanwhile, Warner CEO Stephen Cooper is now clearly the boss of the company, and observers are curious to see how the Cooper-Lyor Cohen business relationship plays out; most believe that the CEO job was Cohen’s next logical move. In the short term, it now appears that Warner is not a seller, although insiders say the Hartwig Masuch-led BMG/KKR group is now keenly interested in Warner/Chappell, having lost out on both EMI and WMG—the latter to Russian kingpin Len Blavatnik, who now owns a company that is significantly smaller in both publishing and recorded music than the other two major music groups. Neither Blavatnik nor Cooper has the experience or relationships essential to succeeding in the music business, which are Cohen’s raison d’etre. If not Cohen, then who? Will the WMG-Sony deal find Morris and Cohen crossing paths again following the latter’s acrimonious exit from IDJ back in the day?... The prevailing belief is that these outsiders simply don’t have the wherewithal to compete with the likes of Morris, Grainge or Bandier, who are putting their vast experience to such effective use… In this light, Madonna’s move from Warner, her home of a quarter-century, to Interscope, in a rumored three-album, $30m deal, speaks volumes... Names in the rumor mill: Rob Wiesenthal, Edgar Bronfman, David Geffen, Jimmy Iovine, Tommy Mottola and John Branca.