Universal-EMI Too Close To Call

With barely a week to go before the European Commission gives its verdict on Universal’s proposed $1.9 billion takeover of EMI’s recorded music business, very few UK business writers seem keen to predict how things will pan out.

While several stories have said the Vivendi-owned company will have to hive off much of EMI if it’s to get the deal past the regulators, others have expressed the view that a new all-powerful major might help shore up a crumbling market.
The Sept. 1-2 weekend papers may have last-minute info from proverbial “insiders” “close to the deal,” but so far a scan of the recent financial pages show the outcome is too close to call.

The recent speculation has been about who will try to buy the various parts of EMI, including some parts that Universal hasn’t even offered to unload. Also under discussion is how the indie music companies – usually the most vehement opponents of any deal that reduces the number of majors – have failed to unite behind their opposition to this one.

That opposition has become ragged, as Daniel Miller saw his chance to buy back Mute, while Domino and Ministry of Sound were both reportedly interested in taking a look at the labels that Universal may have to put on the block.
The main shaker came at the end of July when IMPALA co-president Patrick Zelnik used the Financial Times as a platform to detail why he’s in favour of Universal’s takeover EMI, claiming it’s “just what the sector needs.”

Zelnik, founder of Paris-based Naïve Records and the man who launched Virgin Records in France, was immediately reported to be interest in a bid for Virgin Records in cahoots with Sir Richard Branson, who sold the label to EMI in 1992.

In one interview, Zelnik described IMPALA, the Brussels-based indie music companies’ association, as being “a bureaucratic organisation.”

Faced with a mutiny so high in the ranks, IMPALA executive chair Helen Smith was apparently moved to send out a staff memo that described events as “one of the most trying weeks of IMPALA’s life.”

The week was made even more trying when the memo was leaked to the New York Times.

If some of the indies are eyeing what can be picked up among Universal’s disposals, then David Glick – founder of entertainment and media investment company Edge Group – points out that that it’s not easy to see who would fund their intended acquisitions.

Writing in the Daily Mail’s money pages, he said that, “for historical reasons the music industry has never developed real links with external sources of investment capital.”