And Then There Were 3: Sale Splits EMI Assets Between Sony and Universal

Citigroup has reached an agreement to sell its music label, EMI Group, in two parts for a total of US$4.1 billion. Universal Music Group has announced it is buying EMI’s recorded music division for $1.9 billion.

Sony/ATV, according to news reports, has nabbed — or is poised to nab shortly — EMI’s publishing line of business, the copyrights for the songs. This unit is trading for a reported $2.2 billion. None of the principals returned a call to the E-Commerce Times in time for publication.

The company’s sale was not a surprise — Citigroup put it on the market after foreclosing on its private equity owner in February. However, the pricing raised eyebrows in the music community, as few believed the bidding would go that high.

It remains to be seen whether regulators will approve the sale.

And Then There Were 3

Reactions were mixed about the sale itself — never mind the company’s new owners — as agents fretted about the industry’s consolidation.

“Whenever the industry loses a record company, that’s one less label out there discovering, developing and breaking new artists,” Eugene Foley, an agent at Foley Entertainment and author of Artist Development — A Distinctive Guide to the Music Industry’s Lost Art, told the E-Commerce Times.

“That hurts the up-and-coming artists out there who are looking for a home, and ultimately the consumer as well, as fewer artists are being nurtured and introduced into the market each year,” he added.

The Rise of Independents

It also means a loss of jobs, Foley also said — which will have ramifications, both good and bad, for the music industry.

The negative implications, to state the obvious, is a loss of human capital and energy driving change in the industry, he said.

“The music business became the force it once was not only because of the amazing artists, but also in part to the incredible executives who knew how to record and market the music to the consumers,” Foley explained.

The silver lining, though, from EMI Group’s sale will be a strong independent music community.

“The independent labels will continue to become a welcoming home for former major label executives and home to talented artists who need the guidance of a supportive record company,” he predicted.

Strong Independent Channel Means Strong Digital Distribution

In turn, a stronger independent music label community will further bolster the growing trend to digital music distribution and marketing.

“The industry has been consolidating for over 20 years, but the components always remain in place, just in different form,” Daylle Deanna Schwartz, a music industry consultant and author of the book I Don’t Need a Record Deal, told the E-Commerce Times. “EMI’s sale will make independent music that much bigger, because artists will have less opportunity to be signed to the big labels.”

The independents, she went on to note, have been far ahead of the major labels in their use of digital music and the Internet for distribution.

“At first the music labels didn’t take the Internet seriously, then they were afraid of it, and then they started their legal actions against it,” Schwartz explained. “Meanwhile, the independent artist started grabbing domain names and websites where they can sell their music. They have been very aggressive in using the Internet to promote themselves, to sell their music.”

The indies, Schwartz concluded, have a better grasp of what the Internet can do for their industry.

“They are younger and hungrier and not married to the old system,” she said. “They don’t have the rules or gigantic budgets and complex deal-making processes weighing them down.”