Jury Finds Terra Firma Just Made A Bad Deal In Buying EMI
from the well,-that-went-without-saying,,, dept
Way back when private equity firm Terra Firma bought record label EMI, we actually had some hope that by putting in place some folks with a different viewpoint, they might actually help EMI make the transition to the new world that the other record labels were unwilling to do, since they were too tied to the past. And there were a few encouraging early signs. EMI’s new boss, from Terra Firma, Guy Hands, told everyone at EMI that Radiohead’s business model experiments should serve as a wake-up call to respond to new challenges with “creativity and energy,” rather than lawsuits. Along those lines, he also threatened to withdraw from the RIAA and the IFPI. Finally, he hired two big name techies: including Google’s former CIO and Second Life’s co-founder.
However, there were also indications that the company was still very much unable to adjust, and didn’t really welcome those outside views. Part of it, apparently, was that EMI’s attempt to negotiate new deals with its biggest artists was done in a somewhat tone deaf manner, which pissed off those artists, who got the impression that EMI was trying to take advantage of them rather than trying to help them. On top of that, the company backed down on its threats to leave the IFPI and the RIAA… and instead became one of the more aggressive record labels in suing innovative start-ups and directly suing their execs in attempts to bankrupt them. It wasn’t much of a surprise that the two tech superstars EMI hired both left pretty quickly, as it became apparent they were marginalized within the company.
With this approach, not surprisingly, EMI has suffered massively in the market, and last year, Terra Firma tried to pin the blame elsewhere by claiming that Citigroup had mislead the firm into buying EMI, convincing the private equity firm to overbid. As we noted at the time, this seemed hard to believe. It was no secret that the record label business was in bad shape at the time and really needed a different approach if it was to survive. The problem was that, for all of the early talk, Terra Firma and Guy Hands never really figured out a way to change the company at all.
Now a jury has ruled against Terra Firma saying that Citigroup did not mislead Terra Firma and, basically, Terra Firma just made a bad deal. Considering how they’ve run EMI, perhaps this is not too surprising. Of course, this also means that Terra Firma is not going to get out of the massive debt obligations it owes Citigroup, which likely means that Citigroup will get to takeover EMI, meaning it will sell off the pieces (most likely to Warner Music) knocking the major record labels down to just three: Universal, Warner and Sony. It seems that, as long as they keep merging, they can pretend that it’s okay that they refuse to adapt.