Moses Avalon is one of the nation’s leading music-business consultants and artists’-rights advocates and is the author of a top-selling music business reference, Confessions of a Record Producer. More of his articles can be found at www.mosesavalon.com/blog.
It must be tough to be Roger Faxon right now. In early November, he wakes up to find that not only has his sugar daddy, Terra Firma, lost in court to its lender Citigroup, but many bloggers and journalists (me included) had written an epitaph to EMI, the company he runs, essentially throwing dirt on the grave of the major label before the coroner’s report is signed. Tired of pulling employees off the ledge of the building, Faxon fired back.
In an odd move, rather than call a press conference to publicly diffuse all the negative speculations, which would have opened his comments to journalists’ scrutiny, Faxon opted for a private memo to EMI staff. In essence, he called the press irresponsible and implied that the blogosphere should bugger off.
But Roger is no dummy. He had to know that his “private” memo would be leaked. I mean, he had to know that, right? He’s, like, a CEO in the entertainment industry and stuff, right? And so it was, leaked that is, to Billboard, which published it for all the bloggers and journalists — to whom he’s giving the finger — to see and take their shots.
So here’s mine.
Roger, you are not living in reality. In all likelihood, your precious EMI is about to be foreclosed upon. This is not news I am relishing. EMI has always been my favorite of the majors as far as artists’ rights are concerned. But you have to get your head in the game, dude.
If Terra Firma doesn’t come up with more cash than the gross national product of some small countries, [Guy Hands will] be calling Hollywood Treasures to auction off the toilet seat used by Paul McCartney.
Guy Hands has a few short months to come up an amount of money that would be hard to raise even in a good economy. Writing cute retorts to rumors of Chapter 11 like, “EMI is a British company, and there’s no such thing as Chapter 11 in the UK,” makes him sound like a complete douche bag. So what if a journalist got a nugget of nomenclature wrong (thank God it was not me). The point stands. EMI is in serious trouble. If Terra Firma doesn’t come up with more cash than the gross national product of some small countries, Hands will be calling Hollywood Treasures to auction off the toilet seat used by Paul McCartney.
Faxon’s cavalier attitude is part of the very reason that EMI is in trouble: like many multinational conglomerates these days, it continues to have a sort of pathological optimism about its fate, or its inability to fail, so this memo of his is not to be unexpected. Faxon no doubt navigated through a work environment rife with panicked employees who would not have been able to function without some reassurance from the ship’s captain. He did his job. He gave it to them. Unfortunately, he’s the captain of the Titanic. And I think, despite the bravado in his memo, he knows it.
Looking closely at Faxon’s missive, we can learn quite a bit — not from what he mentions, but rather what he does not mention. Aside from the Chapter 11 thing, he tries to dispel the rumor that the company’s assets would not be broken apart if Citi took control. Calling the notion “idiotic” (I think that one was leveled at me personally), Faxon states that this would be foolish (but not impossible) because breaking off assets to pay back debt would “make EMI weaker.”
Uh…duh. That’s the way companies rise and fall: by selling off assets to pay back debt. Has Roger never heard of the concept of M&A? Does that not exist in the UK? Or is he presuming that EMI employees are too flummoxed to understand movies like Wall Street and Working Girl?
In reality, EMI will have little control over how Citi deals with its assets, should it choose to foreclose. Faxon’s words, accurate as they might be, have no place in a paradigm where entities outside of the music space might view EMI assets in ways that are not in the tradition of selling music masters — loss leader, for example.
Without realizing it, Faxon validated my unique speculation about Silicon Valley’s role in this episode. In trying to defuse the notion that EMI would be bought out by another major label, Faxon waxed on about how none of the other “big three” are in a financial position to do that. This agreed with my piece, wherein I speculate that a tech giant like Google is the more likely candidate for certain EMI assets. Faxon’s memo conveniently ignored this component of my theory.
I can only wonder why. I’m pretty sure that he read it, because many EMI staff members are on this mailing list.
Roger, we’ve never met, but I feel your pain, and I wish you luck. Can’t wait to read the next private internal letter — the one where you ask your artists to buy EMI stock to keep it afloat.
Don’t discount that a rough draft of that memo isn’t in Roger’s mind. Somewhere, I’ll bet, a lawyer is looking into it.
PS: For those on this list who are US EMI employees, my guess is that your jobs are safe for a while. Because the name “EMI” itself is probably the best asset the company has, any buyers would (if history is consistent) keep most of the below-the-line (read: anything below Sr. VP) existing infrastructure.