EMI's business is keeping music fans entertained. The #4 record company in terms of market share (behind Universal Music Group, Sony Music Entertainment, and Warner Music Group) houses recorded music segment EMI Music and EMI Music Publishing. EMI Music distributes CDs, videos, and other formats primarily through imprints and divisions such as Capitol Records and Virgin, and sports a roster of artists such as The Beastie Boys and Lenny Kravitz. EMI Music Publishing handles the rights to over a million songs. EMI Music operates through regional divisions (EMI Music North America, International, and UK & Ireland). Financial services giant Citigroup owns EMI and has announced it is selling the company.
It's no secret that the music industry is in turmoil as a result of declining CD sales and piracy, and EMI has not been immune from those challenges. Owned by investor Guy Hands's private equity firm Terra Firma for years, EMI was purchased by Citigroup in early 2011. Months later, Citigroup put EMI up for sale, and in November 2011, it agreed to sell EMI in two parts for a total of $4.1 billion. Universal Music Group has agreed to purchase EMI's recording division for $1.9 billion, while Sony/ATV Music Publishing is buying EMI's publishing division in charge of songwriting copyrights for $2.2 billion.
EMI is home to more than 1,300 artists worldwide, and has released hits from top-selling artists Coldplay, Robbie Williams, Gorillaz, the Rolling Stones, and Keith Urban. Revenues at EMI Music Publishing, meanwhile, come from synchronization (licensing music for use in movies, television, and advertising) and performance fees. Publishing accounts for nearly 30% of EMI's revenue. The company accounted for nearly 10% of the market share in 2009.
EMI became burdened with a heavy debt after it was bought in 2007 by Terra Firma at the peak of the credit bubble. Other difficulties boiled down to poor management and culture as a result of Terra Firma's strategy to turnaround EMI through a major restructuring. The move included massive layoffs, cutting marketing and administrative expenses, and dropping artists. In addition, Terra Firma reduced the staff of EMI's music division by about one-third and retooled the management team, dismissing its two top recorded-music executives, Alain Levy and David Munns. Despite these changes, EMI needed another cash infusion from Terra Firma in 2009; that year the former parent company injected another £28 million ($44.8 million) into the music firm in order to avoid breaching covenants on a multibillion-dollar loan from Citigroup. EMI turned to its longtime publishing chief, Roger Faxon, to lead the turnaround efforts in 2010. Faxon replaced Elio Leoni-Sceti who resigned that year.
To improve its financial performance in the midst of declining revenues, the company is particularly focused on selling more music through digital channels, such as Apple's iTunes and downloadable ring tones licensed to telecommunications carriers. Also on the digital front, in late 2009 EMI forged a deal with online music service VEVO to provide professionally-created video content for the site, and early that year it began offering concerts and music videos from its artists to Hulu. Continuing this strategy, in early 2010 EMI reached an agreement to offer its catalog on FreeAllMusic.com, a new ad-sponsored digital music download service.
In 2008 EMI announced plans to launch an online music service in order to gather data about customer behavior. Later that year the company finalized deals with Nokia and Myspace to make EMI content commercially available to users of mobile phones and social networking sites. However, the real challenge remains for EMI and its labels to build a more robust stable of artists and generate more hit album releases. The company relies heavily on sales of albums from past British royalty, including David Bowie, Queen, John Lennon and Paul McCartney, the Sex Pistols, and Pink Floyd.
Later in 2008, in further attempts at boosting performance, EMI Music established three specialized business units to focus efforts on New Music (which finds and develops new artists), Catalogue (markets past work from artists), and Music Services (which works on driving additional revenues in areas such as sales, music licensing, and sponsorships).
Before being acquired by Terra Firma for $4.9 billion in 2007, EMI had been the object of several takeover attempts, the most aggressive from competitor Warner Music Group (WMG). EMI and WMG tried several times to combine, but efforts were thwarted by European regulators or questions of the respective companies' values. Overall, the two companies had been engaged in a seven-year struggle to merge, having attempted to combine four times since 2000. In 2007 WMG offered to purchase EMI for $4.2 billion, but the bid was rejected. WMG finally ruled itself out of the bidding, setting the stage for Terra Firma's higher priced acquisition later that year.