EMI’s announcement today that they’re recommending their shareholders accept the $6.3bn offer from private equity group Terra Firma is unlikely to be the end of their stormy ride. The turmoil and confusion in the recorded music market which stems mostly from the industry’s slowness to move to a purely digital model is reflected most prominently in EMI. The company’s recent volte face on DRM, announcing that they would release digital files via iTunes and Amazon DRM-free (without copy-protection) looks very much like the kind of showing willing, management window-dressing needed to attract a private equity buyer who wants to see the value in the digital and online markets. It will without doubt be easier for a private company, outside the glare of public reporting, to make the necessary transformations to its business model to encompass the digital opportunity.
Whether Terra Firma chooses to sell off the Music Publishing arm as its first step remains to be seen. For some the music publishing company represents a relatively risk free cash cow which could be used to balance the unpredictability of the recorded music side. For others, EMI Music Publishing might simply be seen as a quick way of recouping on the acquisition from the get-go.
One of the interesting questions for the new EMI to work out will be how to balance the global pull and impact of the internet against the increase in interest in local repertoire around the world. The dynamic between internet and mobile phone sales may help play into this, but one thing is for sure – EMI will no longer be able to sit and wait, hoping for a suitor to come along and sort out its strategic issues. Now the new ownership will take few prisoners, no doubt drop a lot of artists, and lose a good few of the “old-timer” staff – but in the process if they get it right they could well lead this most elegant of music companies into an exciting digital future in which much of the experimentation and learning of the last ten years finally pays off.