EMI’s New Boss Different Than Old Boss

EMI in the news again (previous discussion from last winter), as more and more high profile musicians decide they would do better negotiating their own deals. The model of music behemoths like EMI holding all the advantages is rapidly changing, and this change is for the better from where I sit.

EMI’s corporate roots stretch back to a pioneer of recorded sound, a German-born American named Emile Berliner, who founded the Gramophone Company. As a result of a merger in the 1930s, it was renamed Electric and Musical Industries Limited.

It was 30 years later that a man named Brian Epstein walked through the doors with a tape from a new band called the Beatles. Frank Sinatra, the Rolling Stones and Marvin Gaye have all called EMI home.

“EMI and the companies that formed it made London a center for musical culture in a way it never was,” said Peter Martland, a professor at Cambridge University and author of “EMI: The First 100 Years. “There is a lot of history there.”

“Since Records Began: Emi : The First 100 Years” (Peter Martland)

But the music business, even in good times, is not welcoming to outsiders. The sensibilities of a financier like Mr. Hands are usually starkly at odds with the folkways of a creative enterprise. Artists’ egos need stroking, and the measurement of success is not the same in music as it would be in running service stations along the autobahn.

“You have to understand the artist’s psyche to make it work,” said Jazz Summers, who manages The Verve, a band signed to EMI, and was present at the dinner last autumn.

The story has even turned comical at times. After Mr. Hands discovered that some employees were laundering costs for things that were illegal (drugs and prostitutes, he said), by itemizing them on expense reports as “fruit and flowers,” he set a strict travel and entertainment policy that required receipts for every expense.

Artists, too, have clashed more openly with Mr. Hands: the band Radiohead has fled and the singer Joss Stone has asked to be let out of her contract. The Rolling Stones, meanwhile, have been talking with other record companies about a new label. (If the Stones left EMI, it would have little impact financially, because the company would still have the rights to the band’s catalog).

“They hate him,” said Hugh Hendry, a British hedge fund manager and former EMI shareholder who had publicly criticized past management, of artists’ opinions about Mr. Hands. “He’s rude. He’s abrasive. He wants to make money. He’s the first to say to artists, ‘We are not going to pay you too much money. Now get out of my office.’ ”

[From EMI’s New Boss Sees Cracks in Music World – NYTimes.com]

Guy Hands reminds me of Chainsaw Al Dunlap; for EMI’s sake, I hope Hands doesn’t use the Sunbeam model as something to emulate.

Facebook Apps

Creating Facebook applications is not a panacea, not an overtly quick route to developer riches, fame, and having 37,000 friends. No, the app has to actually do something useful first.

In May 2007, Facebook Inc. invited software developers to create free software programs that members of the social-networking site could use to entertain and inform each other.

A year later, it’s time to ask: What has worked and what hasn’t?

There’s plenty to pick from. So far, more than 250,000 developers have requested the Palo Alto, Calif., company’s tools for building such applications. And more than 24,000 programs have been created, allowing Facebook users to send each other virtual hugs, share movie picks and play games, among other things.

For some of those developers, the applications have become viable businesses. Companies drawing large numbers of users to the Facebook Web pages associated with their applications are able to sell advertising or even goods or services there. For others, the applications are helping to raise their profile and user ranks of existing operations.

But many more have tried and failed, unable to gain or keep a following. Creating catchy applications is becoming more challenging as the number of applications vying for users’ attention grows and their sophistication increases. Meanwhile, some early tactics used to gain wide reach are being eliminated by Facebook because their intrusiveness drew complaints.

“Entrepreneurs need to ask themselves, ‘What is the problem I’m trying to solve? What is the need I’m trying to address?’ ” says Ben Ling, director of platform marketing at Facebook. “The Facebook platform is not a magic platform and you can plug in anything and it will be successful. It doesn’t make something that’s not useful useful.”

The top 1% of applications accounted for two-thirds of all application activity in the nine months since Facebook introduced the platform, according to a study of Facebook applications published in March by O’Reilly Media Inc., a technology-focused publishing company in Sebastopol, Calif. And only 200 applications hosted more than 10,000 users a day. About 60% of applications failed to attract even 100 daily users.

[From Some Facebook Applications Thrive, Others Flop: WSJ]

The Facebook apps I have installed are ones that take content created elsewhere, and update my page without me having to logon to do anything. I log on every week or two, but my page changes all the time (using data from LastFM, Flickr, twitter, del.icio.us, Upcoming, FriendFeed, possibly others).

Norway’s Think to Sell Electric Cars in U.S.

Wonder if these plans have been altered1

DETROIT – Norway’s Think Global AS, with backing from U.S. venture capital investors, plans to produce and sell a small all-electric car in the U.S. that could go as far as 110 miles when fully charged – fresh evidence that the race to woo American consumers with electric cars is heating up and drawing interest from the same investors that helped build Silicon Valley.

Norway’s Think Global plans to launch an electric car, called the Think City, in the U.S. in 2009.
The Oslo-based electric carmaker, which recently set up a U.S. office in Menlo Park, Calif., is trying to determine what geographical areas to focus its sales activities on, with an aim to launch the car – the Think City – in 2009. Think, a Ford Motor Co. unit until the U.S. auto maker sold it to a Norwegian company in 2003, is also searching for a site in the U.S. and Mexico to assemble the car.

Jan-Olaf Willums, Think Global chief executive officer, said Think plans to sell the City, to be priced less than $25,000, in densely populated cities because of the car’s limited range. The car is just hitting the market in Norway, Sweden and Denmark where a typical user drives the vehicle for a relatively short commuting distance and plugs it into an electric outlet in his garage to charge it overnight.

[From Norway’s Think to Produce, Sell Small Electric Cars in U.S. – WSJ.com]

Something to look out for in any case

  1. since the original article was posted June, 2008 []

Continued Decline of Reliability at Airports

How about re-regulating the airlines altogether?

Air-traffic controllers are leaving their jobs at the fastest rate since President Reagan fired more than 12,000 striking controllers 27 years ago, spurring a rancorous debate over the safety of commercial aviation. But for fliers, the turnover is more likely to affect when their flight arrives than whether it gets there safely.

[From At Airports, Fewer Eyes on the Skies – WSJ.com]

Oh really? Says who?

In recent months, fully certified controllers have been retiring in droves. Some of this was expected since many controllers hired after the 1981 air-traffic controller strike are becoming eligible to retire. But the retirement surge has accelerated beyond the Federal Aviation Administration’s projections because of a bitter labor feud that has dragged on since 2006.

In January, there were roughly 11,000 fully certified controllers, marking the lowest level in more than a decade. In September 2002, the FAA employed 12,801 fully certified controllers.

The National Air Traffic Controllers Association, which represents the FAA’s work force of roughly 15,000 fully and partially certified controllers, has declared staffing emergencies at high-intensity facilities in Atlanta, Chicago, Dallas, New York and Southern California. It calls the loss of so many veteran controllers a “growing crisis” amid surging traffic volumes and a big, hidden factor behind the persistent delays plaguing air travel.

The FAA acknowledges that shortages in the control tower can cause delays

Pilots resigning/retiring, not enough mechanics to service the planes, and now, not enough air traffic controllers? What is going to take to restore trust in airlines/airports? Is there going to be a huge catastrophe before any politician decides to take action?

Union officials also contend the shortage of fully trained controllers — those who have been trained to perform all the major control functions — is increasing the odds that a fatigued controller working overtime will make a catastrophic mistake.

“It’s amazing that it hasn’t happened so far,” Mr. Ramsden said. “The staffing issue has a direct impact on the safety of the public. It has to.”

EMI and Blind Acceptance

Speaking of the slow, painfully public death of record labels, the new owners of EMI (Terra Firma Capital Partners) are not having an easy time. Surprisingly, musicians are much more difficult to manage than generic widgets.

As the chief executive of Terra Firma Capital Partners Ltd., Guy Hands controls companies that lease jets, operate natural-gas pipelines, and, most recently, sell music.

The big difference among those businesses is Mr. Hands doesn’t have to worry about keeping the planes or the gas happy. But the musicians signed with EMI Group Ltd. are a different story — and they’ve been less than pleased with the British private-equity mogul.

The Rolling Stones are considering leaving EMI, as Paul McCartney, has.
“He’s either really stupid, or really smart,” says Jazz Summers, who as chairman of an organization called the Music Managers Forum has found some of Mr. Hands’s statements “not very artist-friendly,” but credits him with taking a big gamble on EMI.

People who do business with the company say that Mr. Hands has inadvertently contributed greatly to the alienation among artists and their representatives. A series of missives and remarks by Mr. Hands has given many in the artist community the impression that he is out of touch with many realities of the music business — including the need to carefully soothe the artists who actually make the hits.

On top of that, key portions of the restructuring plan Mr. Hands unveiled last week, which includes as many as 2,000 job cuts, some complain, treats music as an ordinary consumer product that can be marketed and sold in various territories like soap.

[From Can New EMI Owner Strike a Chord? – WSJ.com]

“Suckers and Liars, Get me a shovel” Some CEOs are damn devils.

Music is not an object that can be bought and sold on the open market, it is an art, and thus needs to be treated with a bit of respect.

In an interview, Mr. Hands says the music industry spent too much time fighting piracy with lawsuits and other tactics, rather than dealing with the situation. “Instead of spending millions shutting down Napster, it should have been working harder,” to find new ways to convince people to pay for music, he says.

Mr. Hands got off on the wrong foot last October with an internal memo that found its way outside the company. He wrote that EMI should be “more selective” about which artists the company signs, as many don’t work hard enough to promote their music. These performers, he complained, “simply focus on negotiating for the maximum advance… advances which are often never repaid.” Many artists and managers felt insulted by the comment, which was widely discussed in the music business.

When Mr. Hands tried to patch things up at a series of dinners with prominent artist managers, he got a chilly reception. At a London restaurant he described to several managers Terra Firma’s track record, including its stewardship of United Kingdom movie theater chain Odeon Cinemas Ltd., telling them “the cinema business isn’t the movie business — it’s the popcorn business,” recalls Mr. Summers, of the managers’ group. Mr. Summers, whose clients include EMI artists Badly Drawn Boy and the Verve, found the remark insulting to musicians: “I told him he’s dealing with artists, not popcorn.”

It hasn’t helped that Mr. Hands, having ousted EMI’s senior management, still hasn’t named a new chief executive, choosing to run the company himself on an interim basis and bringing in music-industry outsiders for key roles. At the same time, some key industry veterans have been shown the door, including Tony Wadsworth, a respected executive who oversaw the company’s British operations for 20 years — including the long, steady erosion of the company’s market share on its home turf. Among those brought in was Mike Clasper, the former chief executive of the British Airports Authority.

“They’re bringing in a lot of executives from other industries,” said Dave Holmes, manager of Coldplay, one of the biggest acts left on an EMI label. “I would say that’s worrying. It’s not very comforting to me.”

(Digg-enabled full access to complete article here)

(the Sex Pistols play their song, EMI – who subsequently fired them )

Death of the Music Industry, Rolling Stones edition

More and more high profile artists are realizing the music labels are dinosaurs who only exist to suck up a percentage of profits. Especially for marquee bands, the labels don’t really bring much to the table.

In what is shaping up to be the latest vote of no confidence from a marquee act, EMI Group Ltd. is in danger of losing the Rolling Stones, along with more than 35 years’ worth of their albums, when the group’s current contract with the London-based music company expires in March, according to people familiar with the situation.

A person close to the Stones, led by singer Mick Jagger and guitarist Keith Richards, said the band members are considering their options after their current recording-and-distribution deal with EMI expires in March. The band has been talking to other record labels and other potential partners, according to people in the music business. The band could still decide to stay with EMI and has until about May to make up its mind.

If the Stones leave, their departure would be only the latest in a string of high-profile defections. Under EMI’s previous management the company lost the rights to release new albums by Paul McCartney and Radiohead. Since private-equity owner Terra Firma Capital Partners Ltd. last summer bought the company for £3.2 billion ($6.28 billion) and ousted the previous management, the pushback from the artist community has grown. Pop singer Robbie Williams’s manager has told the British press his client is considering leaving the label.

The status of Coldplay, perhaps the biggest act left on EMI, may also be in question. People close to EMI had been counting on the band to deliver its still-untitled fourth album in time for release in the first half of this year. But manager Dave Holmes says the band is still working on the album and hasn’t set a delivery date. [snip]

The loss of the Stones could be more damaging than any of the others: Unlike most record contracts, the Stones’ deal with EMI lets the band take all its albums since 1970. The albums in the portion of the Stones catalog currently distributed by EMI — from 1971’s “Sticky Fingers” through 2005’s “A Bigger Bang” — last year sold 395,000 copies in the U.S. alone, according to Nielsen SoundScan.

[From Rolling Stones Might Say Goodbye to EMI – WSJ.com]

[Digg-enabled link to to complete article for non-WSJ subscribers here)

Goodbye three martini lunches! David Byrne wrote an article for Wired Magazine recently discussing the six possible models for musicians to follow, ranging from the 360 (Equity) model to self-distribution. Artists like The Rolling Stones no longer need to be in the 360 model anymore, nor do bands like Radiohead, et al. I think the death of the record labels, as we know them, is rapidly approaching a certainty, and I couldn’t be happier, fitter.

Constituency of One for FCC Chair


His Royal Highness, Bushy, of course. There aren’t many government officials who can keep their jobs when they are unpopular with the Congress, with the citizenry, and with the industry being regulated.

Today, the Federal Communications Commission is set to ram through two measures likely to roil the media and telecommunications industries and deepen political dissatisfaction with the agency’s chairman.

Kevin Martin, a 41-year-old Republican, has already drawn heavy criticism with his determination to pass a rule making it easier for media companies to own both newspapers and television stations in the top 20 markets. The five-member commission is expected to pass that rule and another saying that no single cable company can serve more than 30% of the nation’s cable subscribers.
In a highly partisan capital, Mr. Martin is unusual in that he is coming under attack by members of both parties and several industries. The cable restriction, for instance, has stoked the anger of an industry that expected an orthodox laissez-faire Republican as chairman, only to find an aggressive regulator.
[From Industry Seethes as FCC Sets Curbs]

Mr. Martin’s only government experience seems to be his work on the Shrub’s 2000 Presidential Campaign, and on Kenneth Star’s impeachment theater.

Mr. Martin worked as a telecommunications lawyer in private practice and briefly assisted independent counsel Kenneth Starr in 1997 during the Whitewater probe. Later, he left Washington for Austin, Texas, joining then-Texas Gov. George W. Bush’s presidential campaign. Mr. Martin’s wife, Cathie, whom he met at Harvard Law School, also worked on the campaign.

In 2001, the newly elected Mr. Bush appointed Mr. Martin as an FCC commissioner. His wife worked for Vice President Dick Cheney for several years before moving to the White House’s communications office.

Despite what Amy Schatz asserts in the article, there aren’t many consumer groups who think Mr. Martin’s tenure is worth celebration. There might be some consumer groups who are members of the Christian-Taliban who celebrate Martin’s quest to “clean the smut out of the airways”, and protect our precious ears from dangerous words like fuck and shit, but these consumer groups don’t have the support of most of the nation. The only group who would praise Mr. Martin on the record is Consumer Union’s Gene Kimmelman, for some reason:

Consumer groups are among those who offer kind words for Mr. Martin. “He’s been as accessible as any chairman in the past 25 years to consumer interests. He’s reached out for input,” says Gene Kimmelman, vice president for federal and international affairs at Consumers Union.

Is indecency on cable really what is important?

Soon Mr. Martin’s concerns about indecency on television began to steer him into conflict with the cable and broadcast-TV industries. His staff proposed record fines against broadcast networks for showing racy programming. Mr. Martin suggested that the FCC should fine broadcasters for each instance of a profanity used during a show, instead of just one fine per broadcast.

Mr. Martin pushed for a fine in cases of inadvertent broadcast of profanities, such as an incident involving U2 singer Bono during a live broadcast of the Golden Globes awards. This summer, a federal appeals court sided with the broadcasters and tossed out the agency’s decision.

Mr. Martin has suggested that indecency laws should apply to cable programming, prompting an outcry about free speech. Profit-spinning cable shows such as “The Sopranos” and “Real Sex” on HBO are rich in profanity and sexual images.

Note that Mr. Martin doesn’t have much support:

Intense lobbying in Congress, the FCC and the White House paid off, as a stream of lawmakers began calling the FCC and sending letters decrying Mr. Martin’s plan. Internally, several FCC commissioners complained about the data Mr. Martin’s staff relied on in the report. Ultimately, Mr. Martin was forced to drop his proposal.

“Because we didn’t agree to [a-la-carte pricing] early in his tenure, I believe, and I believe the evidence is overwhelming, that he embarked on a punitive regulatory regime on the industry,” says Mr. McSlarrow, the cable association president. He says private enterprise is “more likely to get it right than someone who’s never been in the business world.”

The media-ownership rules up for a vote today have also sparked a backlash, this time in Congress as legislators complain Mr. Martin is rushing the issue onto the agenda. Yesterday, a bipartisan group of 25 senators warned in a letter to Mr. Martin that they will pursue legislation to block his plan if the FCC adopts it today.

On Friday, former and current Democratic presidential hopefuls Sen. John Kerry and Sen. Barack Obama threatened to block FCC funding to implement the new media-ownership rules. Veteran Michigan congressman John Dingell, head of the House committee that oversees the FCC, said he is “rapidly losing confidence” and recently opened a broad investigation into Mr. Martin’s management of the agency.

Seems only the White House is Mr. Martin’s supporter. Remind you of anyone?
(Digg-enabled full access to the complete article here)

John Nichols of the Nation writes:

The Federal Communications Commission has, as expected, voted along party lines to approve the demand of Rupert Murdoch and other communications-industry moguls for a loosening of limits on media monopolies in American cities.

Now, the real fight begins.

There was never any doubt that FCC chair Kevin Martin, a Bush-Cheney administration appointee and acolyte, would lead the two other Republican members of the commission to a 3-2 endorsement of a move to begin dismantling the historic “newspaper/broadcast cross-ownership” ban which has long served as the only barrier to the buying by one powerful individual or corporation of newspapers, television and radio stations and other media outlets in a community.
[Click to read more FCC Votes for Monopoly, Congress Must Vote for Democracy]

WaMu and Bankruptcy Reform

Reserved Light

Atrios linked to this news tidbit about how Blowback’s a bitch

Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.

The largest U.S. savings and loan didn’t count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.

“Be careful what you wish for,” Westbrook said. “They wanted to make sure that people kept paying their credit cards, and what they’re getting is more foreclosures.”

Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a non-partisan Washington group that tracks political donations.

The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for U.S. financial institutions. It also reached to the top echelons of the financial services industry.
[From Bloomberg.com: Exclusive]

Prior to the 2005 reforms, if one had to choose between defaulting on a credit card and defaulting on a mortgage, the choice was pretty obvious. Not so much anymore. I wonder which of the 75 Senators who voted Yea would change their vote now? (Hillary Clinton abstained for some reason)

News America vs the World

News America has a dark reputation in the in-store media arena as well.

Tatsuda IGA

News Corp.’s trouble in aisle three – Jul. 20, 2007:
For months now, Rupert Murdoch’s quest for Dow Jones has riveted the business world. But another juicy melodrama is unfolding at News Corp., one that may shed some light on how the $25 billion company sometimes does business.

It involves a little-known subsidiary called News America marketing, which comprises the bulk of News Corp.’s magazines and inserts division. It produces newspaper coupon inserts, in-store supermarket ads, and the like. That may seem boring next to, say, movies or MySpace, yet, its profitability is anything but: Its 28% operating margins are the highest at News Corp., while operating profit is triple that of Dow Jones (Charts). Even more scintillating is a series of lawsuits alleging that News America used anticompetitive behavior to try to drive its rivals out of the market, and the recent emergence of a former employee who claims the company tried to pay him off to keep quiet. His lawyer: Philip Hilder, best known for representing Enron whistleblower Sherron Watkins. The saga has become the talk of the industry.

News America’s $1.1 billion in sales make it a small player by Murdoch standards, but it has a market dominance that’s unrivaled in most industries: It controls 50% to 60% of the insert market and as much as 90% of the in-store business, estimates analyst Robert Evans of Craig-Hallum Capital Group. “They are the hands-down 800-pound gorilla,” says Peter Hoyt, executive director of the In-Store Marketing Institute, a trade association.

It’s a gorilla that likes to throw its weight around, according to four separate lawsuits filed by competitors that accuse it of using illegal tactics against them.

A business acquaintance used to work at News America, and is full of stories of anti-competitive behavior and shitty treatment of employees, but of course, without hard evidence, and subsequently no involvement with this case:

But now there may be a smoking gun in the form of an ex-employee who is alleging unsavory conduct on the part of his erstwhile employer. Robert Emmel, a former account manager who worked in in-store marketing, was fired late last year; a few months later, after Floorgraphics subpoenaed him as part of its lawsuit, Emmel revealed he had kept a copy of his computer hard drive because, he said in a deposition, he “had some concerns about some of the business practices that News America had engaged in.” Just what is on those disks is still unknown, but News America isn’t taking any chances: In April the company sued Emmel personally, alleging, among other things, breach of contract and misappropriation of trade secrets. Emmel countersued under Georgia’s RICO statute.

The charges in Emmel’s countersuit read like headlines ripped from Murdoch’s New York Post. Among them: “the extortionate use of economic fear,” “theft and scheme to commit wire fraud,” and the allegation that News America broke into Floorgraphics’ computer system 11 times during one three-month span.

Emmel also alleges that News America’s president, Christopher Mixson, offered him $30,000 in “severance” after Emmel told a colleague he was weighing speaking with the state of Minnesota’s attorney general’s office, which is a co-plaintiff in one of the lawsuits. Reached for comment, Emmel would say only, “I’m a pro-justice individual.” Mixson declined to comment.

As for Carlucci, a quick look at his background suggests a man with a soft spot for tough guys and how they operate. A board member of the Guardian Angels, he has invited founder Curtis Sliwa to speak at a company meeting for several years running. And according to the Valassis lawsuit, Carlucci once tried to motivate his sales force by playing a scene from the film The Untouchables in which Al Capone crushes a rival’s skull with a baseball bat. In Murdoch’s eyes, though, Carlucci is a star: In 2005 he gave him the added job of publisher of the Post, replacing Murdoch’s son Lachlan.

(previous coverage of Carlucci and News America)