Tuesday, November 16, 2010

What The Beatles On iTunes Means For EMI

I received a couple of emails today regarding how The Beatles music finally being offered for sale on iTunes will affect the future of EMI, the major record label currently under siege, so I thought I'd expand on my response that I personally made to them.

First of all, despite what everyone may think, EMI did not go bankrupt. The company was purchased by the private equity firm Terra Firma with money borrowed from CitiBank, which Terra Firma could not pay back. Instead of trying to renegotiate the deal, Terra Firma sued Citi, claiming that the bank tricked them into paying too much for the label (what a wacky premise), but lost the case last week. Now Citi wants to liquidate EMI to get its money back, which may begin to happen soon.

A popular misconception is that EMI kept The Beatles off of iTunes, but that wasn't the case at all. In fact, it was the remaining Beatles and their company Apple Corps (not to be confused with Apple, the computer and iTunes company) that said no for so long. Even though EMI owns the master recordings, the band has veto power over new uses of the masters. Although it's been thought that the band and Apple Corps were too old-school anti-technology in their thinking, the real reason has been speculated that the band was unhappy with the terms demanded by Terra Firma, which if true confirms that this was a company that had no reason being in the music business in the first place. Of course, another reason to hold out this long is that all parties make more money on CDs, but that market's been saturated for some time now.

So what does the new deal with iTunes mean for the future of EMI? In the short term, this will help EMI greatly thanks to a quick infusion of cash, but will probably not change the ultimate future of the company too much. In fact, it might even hurt it a bit, since a prospective buyer no longer has the upside of the initial iTunes offering to look forward to (although they can look forward to the possible release of Bob Seger, who is still holding out on digital downloads).

Regardless, soon enough EMI will be purchased for pennies on the dollar and most likely disappear into history. The next legal battle will be over what happens to the master recordings of The Beatles, Pink Floyd, Bob Seger, Queen and other major artists if the label is sold, since it's thought that many of those masters will revert back to the artists if that should happen, thereby bringing the price down even further.

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