Faxon's Note To EMI Staff
Roger Faxon
Last week’s sudden takeover of EMI by lien holder Citigroup shocked industry analysts who were not expecting any ownership changes until late March. MusicRow has obtained a copy of a letter from EMI head Roger Faxon that was sent to all EMI employees.
Faxon, spins the development as a “good thing – for EMI, for its staff, and most importantly for the artists and writers we are privileged to represent.” He notes that a sale of the company is inevitable, but he expects the record label and publishing assets to remain united. “It is our belief that EMI is greater than the sum of its parts, and that keeping the business together is the best way to create value for our artists and writers – and for our owners. And that is what we are absolutely focused on.”
Here is the letter in its entirety…
You may by now have heard the news that earlier today ownership of EMI passed from Terra Firma to Citigroup. I wanted to write to you all myself to explain why I think this is a good thing – for EMI, for its staff, and most importantly for the artists and writers we are privileged to represent.
First off, I’d like to explain exactly what has happened. When a company’s value is less than its debts, one solution is to go through an administration procedure which allows the sale of the business in partial satisfaction of those debts. In our case it is not hard to see that our parent company would never be able to repay the £3.4 billion it owed to Citi. With that being the case, it appointed an administrator empowered to sell EMI Group to Citi. This is sometimes called a ‘pre-pack’ because it can be done in a matter of hours – and that’s exactly what happened here. This was followed by an immediate recapitalization of EMI, reducing the debt by 65% to £1.2 billion.
So that’s what happened, but what does new ownership mean for EMI and for you?
Well first off, it’s business as usual at EMI. Our staff, artists and songwriters are not affected in any way by these changes – all that has happened is that we now have a new owner in the shape of Citi. This change of ownership has taken place in the holding company above EMI, so it does not have an impact on the day to day business, except a positive one as it removes uncertainty and significantly reduces our debt burden. The existing management team, and everybody you deal with on a day to day basis, remains in place.
While clearly speculation will continue around us – this is EMI, after all – today’s news is incredibly positive for the company. We now not only have a clear strategy, but we also have the right capital and financial structure in place to deliver successful outcomes for artists and writers – and in the end, that is why every single one of us at EMI is here.
I am sure that you will all be aware that we have already made dramatic progress in transforming the business and creating a “new” and better EMI. We have been looking at every single system, process and technology that we have in place to ensure that we have the right set-up to be able to connect audiences to the great music that our creative talent produces. Today’s announcement will free us all up to focus our energy on continuing the transformation of the business.
Our new owners have made it very clear that they are absolutely supportive of our business and our strategy. They will provide us with a stable and supportive environment to continue on our present course as we build that Global Rights Management business. Clearly, a music company – even one as great as EMI – doesn’t exactly sit comfortably in a giant financial services company like Citi. So while Citi is clear that they are under no time pressure to sell, and that they intend to stabilize the business, there is no doubt that in due course EMI will be up for sale – just like it has been from the day Terra Firma bought it.
With the recent news about Warner Music being up for sale, we will no doubt continue to be the subject of the usual media frenzy. The press will inevitably write that EMI will be broken up and sold in pieces, so let me say this as clearly as I can: our global rights management strategy with greater co-operation and collaboration between EMI Music and EMI Music Publishing is the future, and it takes both parts of the business working together to achieve that future. It is our belief that EMI is greater than the sum of its parts, and that keeping the business together is the best way to create value for our artists and writers – and for our owners. And that is what we are absolutely focused on.
I’d also like to quash one other suggestion. Regardless of the country of origin of our owner, EMI remains a British company – both legally and spiritually. The history, tradition, heritage of this company cannot, and will not, be erased by a change in shareholding. We are EMI not because of who owns us, but because of who we are — the home of great artists and songwriters of the past, present and future.
Much has changed at EMI and in our industry over the last three and a half years. But, what has not changed at EMI, and never will, is our fierce devotion to the artists and songwriters we represent. I believe that EMI, in both publishing and in recorded music, is stronger today because of that commitment. And I believe that, as a result of today’s announcement and the progress we have made in changing the company to date, we are better placed than ever to deliver on the promises that we make to every single one of the artists and writers that entrust us with their music.
Thank you to you and your artists for working with EMI, and for your support as we forge a new and exciting music business for the future.
All the best, Roger
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