The next round of bidding for EMI is expected to take place next week. According to the Dow Jones Newswire, current owner Citigroup has invited a number of parties to submit second bids after the Labor Day Weekend in the US, initial bids having been made at the start of last month.
While it’s not clear which of the initial bidders have been invited to submit more detailed proposals, it is thought that existing music companies Warner Music, Universal Music and BMG are all still in the running. It’s also thought that bids for both EMI in its entirety and the major’s constituent parts are both being considered and, while Citigroup has previously indicated it would prefer to sell the music company to one buyer as a going concern, the bank is ultimately likely to go for which ever option would bring in the most money.
Meanwhile, Digital Music News has been wondering if the final price paid for EMI could be affected by a pending squabble in the US over a clause in the country’s 1976 Copyright Act. The Act included a termination clause that basically says American creators can take back ownership of their works after 35 years (56 years for pre-1978 works) oblivious of contractual agreements with commercial organisations like record companies or music publishers.
The termination clause is due to go into effect for music created in the late 70s in 2013, with artists planning on using the clause obligated to file the paperwork this year. As the deadline approaches some have been referring to the termination clause as a “copyright timebomb”.
The actual impact of the clause on the American copyright industries remains to be seen, though for the record industry it depends mainly on whether or not you believe sound recordings, as opposed to musical compositions, are affected at all. Needless to say, the record companies argue sound recordings are exempt from the clause, while some key artists and their managers argue that is not the case. With the labels having failed to get Congressional clarification on this point two years ago, now everyone expects there to be a big landmark court case, probably involving a big heritage act, that will decide whether the 35 year opt out applies to recording artists.
So, it’s all a bit confusing, and certainly throws a spanner in the works if you’re charged with the task of working out how much EMI’s catalogues of songs and recordings will be worth in the next ten years. But could it, as Digital Music News seems to imply, result in millions being shaved off the offer price for EMI? Possibly not. After all, Warner Music faces the same issues, and yet it fetched more than most expected when sold earlier this year. And arguably a lot of EMI’s really valuable catalogue is mid-60s which, under the 56 year rule, still has a decade to go before the termination clause kicks in, even if it is deemed to apply to sound recordings.
But still, if Citigroup find offers are not exceeding the $3 billion they are looking to raise through this sale, it might be one explanation as to why.