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) 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. The business operates through three regional divisions: EMI Music North America, International, and UK & Ireland. Financial services giant Citigroup owns EMI, and has announced it is selling the company to Universal Music Group. It already sold the company's music publishing business, EMI Music Publishing, to a consortium led by Sony in 2012.
Formerly owned by investor Guy Hands's private equity firm Terra Firma for years, EMI was purchased by Citigroup in 2011. Months later, Citigroup put EMI up for sale, agreeing to sell EMI in two parts for a total of $4.1 billion. It first sold EMI Publishing in 2012 to a group of investors led by Sony for $2.2 billion. Going forward, EMI Publishing is operating as part of Sony/ATV Music Publishing. Meanwhile, Universal Music Group has agreed to purchase EMI's recording division for $1.9 billion.
Several factors led to the sale. 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. EMI became burdened with a heavy debt after it was bought by Terra Firma at the peak of the credit bubble in 2007. With both credit markets and the music industry in turmoil, Citigroup decided to break EMI in two to maximize value from its two main businesses. Universal Music Group is acquiring EMI's record company to gain even more control over the music market, amass a dominant collection of copyright holdings, and boost digital services.
To improve its financial performance in the midst of declining revenues, EMI has been particularly focused on selling more music through digital channels, such as Apple's iTunes and downloadable ring tones licensed to telecommunications carriers. 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.
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.
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