Universal Announces New Structure, Appointments for Nashville Label Group
Universal Announces New Structure, Appointments for Nashville Label Group

As interested parties line up for Universal Music Group's divested EMI assets -- particularly Parlaphone Records -- artists and managers are encouraging bidders not to forget about the artists.

Jon Webster, CEO of the Music Managers Forum (MMF), argues the European Commission looked at competition only in its "naked form" when reviewing the merger. Financiers do the same, says Webster, head of the organization of U.K.-based artist managers whose members represents Paul McCartney, Mumford & Sons, Chemical Brothers, Elton John, Kaiser Chiefs, Damien Rice and many others. "They look at it in very cold, economic terms."

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But Webster is trying to change that. He and the MMF are talking to potential buyers to build a new type of business that's more a "holistic, artist-partnership business" than "just the old type of copyright-trading business" the record business has seen in the past. This is the type of artist manager and artist services company seen today, he says, that put long-term careers over short-term success.

It's an interesting subject. There are two, interrelated ways to look at this issue: artist contentment as a financial value and artist contentment as a facet of corporate social responsibility.

Let's look at the financial value first. A happy artist is a more valuable artist means a more valuable company. EMI Music was arguably more valuable before artists started leaving EMI near and during its ownership by private equity group Terra Firma. EMI lost the Rolling Stones, Robbie Williams, McCartney and Radiohead in the span from 2007 to 2010. This didn't impact just new releases by aging rockers. The Rolling Stones and McCartney took with them distribution rights to catalogs going back to 1971 (for the Stones) and 1970 (for McCartney).

While the MMF is pressing potential bidders, artists don't have to worry their recordings and contracts are going to be sold to another private equity owner. In the hopes of creating a strong competitor for Universal, the European Commission has ruled that a bidder for the divested EMI assets must be "already active as a record company" or "have a proven track record in the music industry."

But an artist may want to consider the bidder's ability to create a fulfilling partnership. Today's partnerships are built on expanded-rights contracts, or 360 deals. A suitable bidder for Parlaphone, for example, should be able to fulfill those expanded rights through its own infrastructure or assign those rights to another party. A private equity bidder wouldn't have the infrastructure to create the kind of long-term partnerships that would create a strong competitor to Universal -- which is what the European Commission wanted in the first place.

Artists had spoken up before about the Universal-EMI merger. The Featured Artist Coalition (FAC) wrote a letter to the Financial Times in July that called for divested copyrights to first be offered to the performing artist at market rates.

"It would be good to have music business people rather than financiers owning and running music companies again," wrote FAC co-chairs Ed O'Brien (Radiohead), Nick Mason (Pink Floyd) and Sandie Shaw. "It would be even better to have artists owning their work and entering into partner relationships with service-providing major and independent record companies with all the finance and expertise an artist needs to develop their own business."

Perhaps. But at the level of Parlaphone, artist ownership of their catalogs may be at odds with risk-taking needed in today's record business and the level of competition the European Commission desired to create in the marketplace.

There's also a corporate social responsibility (CSR) angle here. CSR is corporations' attempt to good corporate citizens by addressing social and environmental problems. Corporations that appear motivated only by profit can actually do themselves more harm than good. This goes well beyond donating to non-profits. Corporations have CSR mission statements, CSR officers and CSR strategies woven throughout the organizations.

Maybe it will happen in due time, but it seems odd that consumers can care so much about, say, working conditions at an Apple supplier's manufacturing facility but they aren't terribly concerned about the treatment of their favorite artist. CSRHub, a service that provides CSR ratings for corporations -- including Universal parent company Vivendi -- doesn't have a category for artist contracts. Instead, CSRHub focuses its assessment of a corporation's responsibility on things like diversity & labor rights and energy & climate change.

We could see artist policies in music companies' CSR someday. These would help form the foundation for the types of deals the MMF's Webster says will help music companies foster better relationship with artists. "They are the companies that will be more successful in the long run," he says.

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