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Friday 22 February 2019

The End of a Music Icon

EMI was seen as the champion of art over commerce. In the end, commerce won.

By Eamonn Forde

It was the biggest record company in the world and, for four decades at least, arguably the greatest. But today EMI no longer exists.

In the 1930s, 40s and 50s, it was mainly at the cutting edge of heavy technology – involved in the development of stereo recording, radar, CT scanners and more. In the period after the second world war, it was perhaps best known for classical recordings and comedy albums by the likes of the Goons and Jack Benny and the Gang, slowly testing the water after the splash made by rock ’n’ roll with the signing of Adam Faith in 1959.

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Assembly workers at the EMI factory, producing the Beatles’ Rubber Soul

In late 1962, however, everything was to change, not just for EMI but the entire music business and popular music as an art form. Having been coldly rejected by pretty much every other label, a desolate Brian Epstein took a Liverpudlian group he managed to George Martin, then head of the Parlophone division of EMI, who took a punt and signed and also produced them. Within a year Beatlemania had engulfed the planet.

From there, suddenly richer than Croesus, EMI was top of the heap and managed to pull off, again and again, the trick of signing acts who were musical outliers but who could also gatecrash the mainstream. Kate Bush, Kraftwerk, Pet Shop Boys, Iron Maiden, Blur, Radiohead, Chemical Brothers, Daft Punk, Kylie Minogue, Sigur Rós; on and on the list of maverick superstars goes.

And from the 1960s onwards, EMI was determinedly flying the flag for British talent on the global stage, from Pink Floyd to Coldplay, Duran Duran to Gorillaz. For many years EMI, particularly the Parlophone imprint, was a coveted label artists longed to sign with. Its pound-sign logo acted like a kitemark for music. For musicians, the name alone was both an icon and a talent-magnet because it was seen as championing art over commerce. The simple presence of EMI in the UK forced the other, non-British, majors to up their game.

Andrew Whittuck/Redferns

Pink Floyd: Roger Waters, Nick Mason, Syd Barrett and Rick Wright at the mixing desk at EMI

But today, EMI resides as merely a suffix in Virgin-EMI, now part of the behemoth that is Universal Music Group, a bitter irony given that EMI bought Virgin Records in 1992. How it fell so spectacularly from grace is not just an illustration of the pain barrier the music industry went through with the arrival of digital at the turn of the millennium, it also stands as a warning of how not to – or rather when not to – buy a company and try to turn it around.

In 1999, the record industry was living a life of excess, enjoying the fruits of the compact disc reissue boom. That year the global record business was worth close to $40 billion, according to IFPI (International Federation of the Phonograhic Industry) numbers, and EMI controlled 11.8 per cent of it. It was the third biggest of the five major labels (just ahead of Warner and BMG, although some distance behind Sony, with its 17 per cent market share, and Universal, with its 21.7 per cent share).

In the summer of 1999, however, Shawn Fanning created the Napster client software that allowed the mass sharing of music files (MP3s) for free, thereby undermining the main source of income for record companies and artists. The domino effect of this resulted in the CD losing its commercial lustre and triggered a 14-year decline in record industry revenues. EMI was to be the biggest casualty. Only now is the industry as a whole emerging from that deep trough, thanks in large part to streaming subscription services like Spotify and Apple Music.

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Kraftwerk, another giant of the EMI stable, on stage in 2018

Coinciding almost exactly with Napster first showing its fangs, EMI sought to merge with Warner, which would have been a perfect solution for both sides. EMI was strong in Europe but historically weak in the United States, music’s biggest market; Warner was the opposite. Together they could have balanced each other out. The regulators, however, had a different view and blocked several merger attempts on competition grounds. Yet in 2004, both companies had to look on helplessly as EU regulators waved through the marriage of Sony and BMG. The record business was now defined by a duopoly, with Universal and Sony/BMG controlling around half the global market between them. It was difficult for anything else to grow in their combined shadow.

This meant that EMI could never merge with another music company and, by 2006, its board, coming off the back of a series of profit warnings in a rapidly shrinking market, went courting venture capitalists (VC), who would not have to worry about clearing regulatory hurdles. The last company in the running was Terra Firma, a VC firm headed by Guy Hands, and it laid down £4.2 billion to buy EMI’s recorded music and publishing arms. Terra Firma had recently turned around the German service station chain Tank & Rast and was in the midst of re-energising the British Odeon cinema network. But it had just missed out on the bidding to buy one of the most famous names on the British high street, Boots the Chemists. The tang of success on its lips, Terra Firma was now buying its way into the glamour of the music business.

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Damon Albarn of Blur during the band’s tour of their 2015 album

The timing, however, was terrible. Not only were record companies halfway through what was to become a 14-year decline, Terra Firma had borrowed £2.6 billion of that £4.2 billion from Citigroup just before the global financial meltdown and the debt markets evaporated like a cup of water on a furnace.

Terra Firma came into EMI with swingeing cuts, drastically reducing the global workforce and paring back its roster of acts. It spoke the language of the City but struggled to play the tune of musicians – delicately balancing discussions of art and commerce, leaning heavily on the former while dancing gingerly around the latter. The net result was that marquee acts walked. Radiohead decided to put out In Rainbows themselves, mere weeks after Terra Firma took hold of the keys, letting fans choose what they wanted to pay to download it and changing the public’s perception of music’s value in the process. They were followed by Paul McCartney, the Rolling Stones, Queen and more. EMI’s heritage acts were deserting it and it was struggling to attract new ones.

Spotify was emerging just as Terra Firma took over EMI but it was still years from helping the record industry back into the recovery position. Yet despite the odds and many false starts, by 2010 Terra Firma finally had EMI on an even keel and was starting to rebuild and re-energise the label. But it was to prove too little, too late. Citi eventually seized EMI back from Terra Firma – triggering two separate but equally doomed court cases relating to the loan – at the start of 2011. It was eventually put on the auction block and Universal, despite being the biggest player, bought the bulk of it and the Parlophone label (minus the Beatles, who Universal ensured it took) went to Warner.

What part did the industry regulators play in that outcome? Regulators have to strike a balance between ensuring companies can survive and grow in a difficult market but not do so at the cost of cultural diversity. They allowed Sony and BMG to merge but repeatedly blocked EMI and Warner. That sent out confusing messages to the market because it created a duopoly in the form of Sony and Universal.

This in turn meant that the gap between them and EMI and Warner widened.

Jay L. Clendenin/Getty Images

Chris Martin and Coldplay, major British talent showcased by EMI, in 2008

It would arguably have been better for EMI and Warner and the industry as a whole if they had been allowed to merge – three majors on a relatively equal footing with each other alongside the collective market force of the independents. This would have brought important checks and balances to the industry. The indies have historically been against consolidation as the majors steadily bulk up their market power but they would rather have seen EMI merged with Warner to even things out than watch powerlessly as the biggest player in the space (Universal) got even bigger.

We are now left with three major record companies – Universal, Sony and Warner – who, between them, have a stranglehold on the charts. This reduction in the number of majors means there are fewer backers for a more diverse range of artists; with consolidation comes conservatism. Through streaming they are all seeing their revenues start to grow again, but this concentration of power means that the charts are a somewhat safer place. For now, at least. Independent labels like XL, Domino, Warp, Mute, Brownswood, Speedy Wunderground and Ninja Tune remain critical in finding new talent and new voices, but the disappearance of EMI has left a hole in both the business and the culture.

Terra Firma came in to try to save EMI – from the vagaries of the market as much as from itself. But there is an argument that it was merely delaying the inevitable and EMI, the weakest of all the majors, was always going to be swallowed up by its stronger and bolder competitors. It was perhaps always a matter of when, not if.

Like Rolls-Royce, EMI was a British triumph, the envy of the world and a symbol of quality. This dynamic and revolutionary music company brought the world Strawberry Fields Forever, See Emily Play, Wuthering Heights, Bohemian Rhapsody, West End Girls, Song 2, Karma Police, Fix You, and more. We will never see the likes of EMI again and we, and our music collections, will be all the poorer for it.

The Final Days of EMI: Selling the Pig, by Eamonn Forde, is published this week by Omnibus Press, £20