Apple Buys EMI

[Anderton]

Copyright 2010 by Robert Scott Lefsetz and reprinted with the written permission of the author.

 

 

And the Beatles join the iTunes Store just in time for Saturday's iPad launch.

 

The deal... Just like with Apple's purchase of Lala, no hard numbers have been released. But both Citi and Terra Firma are happy. Citi gets its money back, and Guy Hands gets to save face, Terra Firma's covenant breaches become irrelevant, there's no need to raise and inject new capital and by selling to Jobs, et al, Hands gets to spin the concept that this was his plan all along.

 

Yes, the catalog license was just a ruse. Because, after all, everyone knows that Mr. Hands is smarter than Doug Morris and Mel Lewinter. Lucian Grainge? He's a glorified A&R guy with a bean counter mentality. Hands played the Universal boys like a fiddle. Do you really think he'd place the Fab Four's music in the hands of such charlatans? When he can put it in its rightful place, in the bosom of Steve Jobs, and see it live forever?

 

What we do know is Apple's got more of a future than major labels. Which is why the Cupertino company is smart enough to immediately close down new music development at EMI. It's about the catalog baby, unless you can stunt. Which is why Damian Kulash and OK Go are coming back. Yes, that was part of the deal, Jobs insisted. Upon launch of the 3G iPad, there will be a new OK Go video, to bump sales thirty days after the Wi-Fi launch. And, one year from now, when the 3-D iPad launches, the OK Go Rube Goldberg video will be free in 3-D for all purchasers. Along with a gratis copy of "Up" in 3-D.

 

A 3-D iPad?

 

3-D TV makes no sense. Sitting on the couch with those doofus glasses. But every 3-D iPad will come with WHITE glasses! Can you imagine the rage? Haven't heard from Kanye recently? That's because he's part of the 3-D iPad launch! He's going to promote the white glasses! Dr. Dre and Beats headphones? Come on. Monster compared to Apple? Iovine's no match for Jobs. Whatever happened to that Jimmy sponsored high quality sound for computers...go the way of SACD and DVD-A?

 

Anyway, despite turning EMI into a catalog company, there will be a road open into the new Apple-owned EMI (for the record, the EMI name will be dropped...no, it won't be called Apple Records, because of the Beatle conflict, the record company will just be another division of Apple Inc.) Apple has brokered a deal with SonicBids, wherein wannabes can submit music to be used in iPad promotions. One wonders how this works, because of the low quantity of music ultimately required and the vast number of submissions, but that hasn't stopped SonicBids in the past, so...

 

In other words, Apple will be in the new music business, but only for songs they can use to cross-promote Apple products. Furthermore, if you make a deal with Apple, you cannot tie in with any other company. Steve loves his walled garden. So, if you're contemplating a deal with Procter & Gamble, don't waste your time with SonicBids.

 

So what does this mean for music?

 

The story since the purchase of Lala has been cloud-based listening. But now that Apple owns not only the Beatles, but the Beach Boys and the Band (what Steve refers to as the "Three B's"), the company plans to drive down the price of music at the iTunes Store. Yes, within thirty days, every EMI track will be a dime. The major labels wanted higher prices?? Let them wrestle with LOWER prices! Yes, music will be a loss leader, all to sell iPads, iPods and iPhones. Everybody knows the money's in hardware. Furthermore, with streaming imminent, why not blow out MP3s? It took Universal ten years after Napster to drop the price of the CD to ten bucks? Apple can see that ownership is near extinction, they want to blow out product while they can.

 

As for the Beatles... They will only be available in Apple Lossless format. Yoko Ono insisted. It's a way of separating John from the legacy of Phil Spector, who famously wore that button "Back To Mono". By only making high quality files available, fidelity will be luscious, you won't get the compressed Wall of Sound and Phil can rot in jail, where Ono believes he belongs.

 

But, you say those lossless files take forever to download, they're bandwidth hogs!

 

Not Apple's problem. You pay for your Wi-Fi. And good luck downloading via AT&T on 3G, which is why Jobs will reveal the Verizon iPhone and iPads before the 3G model actually launches.

 

Controlling the music game, owning EMI and retail, forcing the other three major companies to play on his terms or die, Mr. Jobs is now moving into the touring sphere, where the majority of today's music money resides.

 

A deal has been brokered with Live Nation. With every concert ticket, you get a free download of the show within twenty four hours, IN VIDEO! Well, not every concert, just those acts controlled by Front Line. Yup, starts with the Eagles. Then Van Halen, who will be back on the road, although Valerie Bertinelli will not be singing backup, Perez Hilton's information is incorrect. Irving's plowing ahead with those acts who've collapsed all their rights and can make these deals. Yes, that was Terry McBride's concept, and his old charges the Barenaked Ladies, having a deal with EMI, will immediately make their concerts available on iPads too.

 

With so much power residing in Azoff and Rapino's empire, acts under contract to labels will clamor for their companies to grant iPad concert rights too. Soon, well, in two or three years, you know how slow the majors work, every concert ticket will come with a video. Expect audio first. You know how the majors like to dip their toes. Then again, Jobs has hired Hilary Rosen to whip the labels into shape, telling them this is the second coming, to get on board NOW, not to screw up like they did ten years ago.

 

Then, there's the true breakthrough. iPads at the show.

 

Yes, your iPad is your ticket. The screen will display a giant bar code. And this will thwart scalpers...like they're going to buy a boatload of iPads? Then again, just like acts scalp their own tickets, there's rumor of a back door deal between Azoff and Apple to do just this, sell discounted iPads to brokers, Azoff getting his money directly from Apple...

 

And once you've got your iPad at the gig, let the games begin!

 

Sure, you can tweet, and update your Facebook page. But, for an extra fee, you can get backstage video, every fan's true desire. For even more money, you get a personal greeting from the band member of your choice, to keep forever (or as long as your iPad works...) There's been talk of a further opportunity, one involving intimate involvement with performers after the show, but so far this has only been legally cleared in Nevada. Then again, Las Vegas is a burgeoning concert location.

 

Will iPads dominate at festivals?

 

Interesting question. Do you want Coachella Crud on your iPad? Or Stagecoach Schmutz? There's talk of a new device, much smaller, called the iWrist, but with such a small screen, it may be unworkable.

 

As for now, Steve Jobs illustrates his mercurial nature once again, doing the unexpected, swooping in and seizing an opportunity available to all, but making it work as a result of synergy. Yes, Microsoft kicked the tires. And Elevation Partners too. But Microsoft has got no hardware, no way to maximize the value. It made no sense for Ballmer to overpay. Sure, he could put Beatle pictures and music on Bing, but that's hard to truly monetize.

 

Palm's got the device, but no money and no traction. Bono and Paul McGuinness met with Guy Hands, but refused to put any of their own money into the deal. Guy told them U2 might be the biggest band in the world, but he couldn't sell the company on faith. As for trusting Roger McNamee...that just elicited a laugh.

 

As for Google... That was the reason for the Jobs/Schmidt summit last weekend (http://www.sfgate.com/cgi-bin/blogs/techchron/detail?entry_id=60029&tsp=1) One, it distracted the press from sniffing out the EMI deal. Two, it signaled a division of spoils, wherein Apple gets music and Google gets search. Like two Mafia bosses, they divided up the landscape. Then again, Google was worried about worldwide exploitation of the Beatles, the band is still seen as subversive in China.

 

So the major label era is finally finished.

 

Steve said there's no way he's paying "Hits". Indie promotion is truly history.

 

Rob Stringer is cock-blocked. Yes, he wanted to sell to Apple first, but his brother nixed the deal. Sir Howard still believes he can resurrect the moribund Sony brand. Ain't that a laugh. Although there is supposedly a PlayPad in development.

 

Lyor Cohen... That's why he's selling his townhouse. He knew, he's out. As for Edgar Bronfman, Jr....it's like that old Paul Simon song, "Something So Right"...

 

"When something goes wrong

I'm the first to admit it

I'm the first to admit it

But the last one to know..."

 

So it's Steve's world. We just live in it. All you Apple haters can either get on the bus or be left behind. Tech rules. And techies are smarter than music business people. Even hedge funders are smarter than music business people. Come on, can't you give Guy Hands credit, he played this beautifully!

 

(Note: Clive Calder was outbid for EMI by Apple, he saw no reason to pay so much, he had no synergy, but expect him to buy both Warner and Sony in the aftermath, which he will run on the cheap, with Billy Ocean as head of A&R.)

 

 

--

Visit the archive: http://lefsetz.com/wordpress/

--

http://www.twitter.com/lefsetz

--

If you would like to subscribe to the LefsetzLetter,

http://www.lefsetz.com/lists/?p=subscribe&id=1

[offramp]

Hmmm. If this were posted on any other day...

[blue2blue]

Hmmm. If this were posted on any other day...

Yeah... I couldn't help but notice that Craig coyly left off the pub date on the article...

 

 

 

(And, while EMI's financial difficulties are in the news, Lefsetz and those citing his blog piece are the only ones floating this angle.)

[cooterbrown]

That's a lot of of work and imagination to put into a 4/1 joke.

[Jeff da Weasel]

Funny stuff, but if Terra Firma/EMI doesn't come up with some dough by 6/14, EMI will be owned by the bank. Apple sounds like a much better option.

[blue2blue]

That's a lot of of work and imagination to put into a 4/1 joke.

I think it's pretty clear that Lefsetz is a funny guy. In many senses of that word.

[blue2blue]

 

Funny stuff, but if Terra Firma/EMI doesn't come up with some dough by 6/14, EMI will be owned by the bank. Apple sounds like a much better option.

 

It would be the final (situational) irony on the Apple v. Apple thing...

[Anderton]

I think the "Billy Ocean as head of A&R" line at the end kind of gave it away

[drewl]

I think the "Billy Ocean as head of A&R" line at the end kind of gave it away

 

That's what got me guessing....guess we'll have to wait and see.

[dparr]

[offramp]

I think the "Billy Ocean as head of A&R" line at the end kind of gave it away

 

1) I didn't get that far.

 

2) Had I gotten that far, it still might not have set off any alarms. I imagine Mr. O ain't doin' too much these days and could probably use the paycheck.

[Gus Lozada]

1) I didn't get that far. 2) Had I gotten that far, it still might not have set off any alarms. I imagine Mr. O ain't doin' too much these days and could probably use the paycheck.

 

I did not get that far either. I kinda panicked while reading the first lines

 

... until I realized it was... today.

[Phil O'Keefe]

When I saw the email title from Bob Lefsetz, I figured it was an April Fools joke from that alone. But the more I read it, the more I appreciated the way he made it seem plausible.

 

The guy's an incredible writer, and makes a lot of good points in his LefsetzLetters. I really enjoy reading his stuff. :phil:

[Hush]

I was reading until "every EMI track will be a dime". Then I knew...

[flatfinger]

I was reading until "every EMI track will be a dime". Then I knew...

how many refuse to pay even a dime for a song now ???

[offramp]

No idea who Bob Lefstez is. Guess I'm not hip enough.

[Rudolf von Hagenwil]

No idea who Bob Lefstez is. Guess I'm not hip enough.

He seems to be a guy with a colorful language, possibly aimed to neurotic readers who may like this wordy style, but zero clue about entertainment industry and its financial background.

[tradivoro1]

And this is why Craig Anderton will continue to live in legend and song, and we'll continue to look forward to his next article: it will informative, entertaining, and sometimes very amusing... If they're giving out prizes for April Fool's stunts, this definitely deserves to be considered for one... The Bronfman line was very funny....

[Coaster]

He seems to be a guy with a colorful language, possibly aimed to neurotic readers who may like this wordy style, but zero clue about entertainment industry and its financial background.

[Rudolf von Hagenwil]

first, I don't judge, second, I work at the firm which plans to buy the EMI and already owns 54% of EMI's operation in Asia.

[blue2blue]

(reverse chrono order, bold added)

He seems to be a guy with a colorful language, possibly aimed to neurotic readers who may like this wordy style, but zero clue about entertainment industry and its financial background.

[Rudolf von Hagenwil]

well, blueIIblue, this bloke is a blabber mouth, and I mean not only his joke about apple buying EMI, but almost everything in his blog, he is more like a standup comediant, but one who lost any relation to reality

[Cry Logic]

 

well, blueIIblue, this bloke is a blabber mouth, and I mean not only his joke about apple buying EMI, but almost everything in his blog, he is more like a standup comediant, but one who lost any relation to reality

 

 

I like the Lefsetz pugnacious, "in your face", no holds barred style.

He's deliberately trying to stir the pot.

Let's face it ... the music business is in dire straits and has been for some time.

It's still too early to tell whether he's right or wrong about which way the business

is headed, but whether he's a fool or a guru, at least he gets people talking and

thinking about it all.

 

And that's a good thing imho.