A Sony-led consortium handed over $2.2 billion to Citigroup on Friday, and took collective ownership of EMI Music Publishing, meaning the once British-owned major music company has now been officially split into two. The US bank will keep hold of the other half for the time being while Universal’s bid to acquire it continues to be investigated by regulators in America and Europe.
Sony and its partners completed their takeover of the EMI music publishing business within hours of the deal getting approval from America’s Federal Trade Commission. The European Commission gave the transaction its approval, subject to a number of remedies, back in April. Those remedies mean that, as Sony takes ownership of EMI Publishing, the Virgin and Famous UK song catalogues are now up for sale. BMG, which bid against the Sony consortium for EMI outright, is now expected to lead the bidding for these not insignificant former EMI publishing portfolios.
Confirming the Sony-led purchase had gone through, the newish boss of Sony Corp, Kazuo Hirai, told reporters this weekend: “Music publishing, along with the rest of our entertainment companies, has been a bright spot in our business portfolio, and we expect that trend to continue with this important acquisition”.
Meanwhile Marty Bandier, the former EMI Music Publishing chief who now heads up Sony’s publishing business, and who will now lead both companies, said: “Today is a truly special day. As I become reunited with the company that has many of the greatest songwriters and songs of all time, I look forward to helping create the best music publishing company in the world, with the extraordinary talent – artists, songwriters and staff – at the combined Sony/ATV and EMI”.
Although Bandier refers to a “combined Sony/ATV and EMI”, the two publishing companies will technically remain separate entities, because of the slightly complicated nature of the acquisition, ie Sony, which owns 50% of Sony/ATV, will actually be a relatively small shareholder in EMI Publishing overall. As previously reported, that ownership structure was one of the reasons the European Commission approved the deal, believing that the involvement of other investors would ensure Sony itself wouldn’t become too dominant.
According to the European Commission’s report on the acquisition, published last week, Sony and its partner in Sony/ATV, the Michael Jackson estate, will own their stake in EMI – believed to be about 38% – via one holding company. The consortium’s other investors, which includes Mubadala Development Company PJSC, Jynwel Capital Limited, the Blackstone Group’s GSO Capital Partners LP and David Geffen, will hold their stakes via another JV holding group. The EMI publishing company will have its own board made up of reps of each investor organisation.
But day-to-day, Bandier will be in charge of EMI Music Publishing as well as Sony/ATV, giving him control of over two million song copyrights. It’s thought, partly on the basis of a document leaked earlier this year, that EMI Publishing will continue to have its own A&R divisions, and will continue to sign and work with songwriters directly, though rights administration will be outsourced to Sony/ATV. That arrangement will likely result in substantial redundancies at EMI Publishing, though presumably some will be offered roles at Sony/ATV, which will need to increase its administration resource.
Exactly how all this will work is not yet known – and not even Bandier and his top team will completely know what they are going to do until they get access to and knowledge of all of EMI’s inner workings, which will presumably happen this week. Plus, of course, there is the added complication of the big split of the EMI publishing business and EMI record company, and what to do with any group level units which don’t directly belong to either. After months and arguably years of uncertainty, some key decisions will now start being made regards the future of the various EMI businesses and the people who work there.
Universal’s bid to buy the EMI record company is still ongoing, of course, with EC regulators undertaking a more in depth investigation on that one, and the FTC also still considering the deal. Although there were opponents to Sony’s EMI Publishing bid too, opposition to Universal’s acquisition has been more vocal, with both Warner Music and the independent label community expressing big concerns.
Sony Music – Universal’s main rival in the record industry, in that it is of a similar size – has so far been very quiet about its competitor’s bid to jump ahead in market share terms through an EMI acquisition. After all, raising objections to Universal’s big EMI record label bid while its own sister company was involved in an even bigger deal over the EMI publishing company would not have been wise. Though Billboard cites sources who speculate that, with Sony/ATV’s regulatory approval in the bag, Sony Music might now start publicly objecting to the Universal deal. Which would be cheeky, but interesting.