The fall of music giant EMI: What went wrong?
The iconic record label — home to acts from the Beatles to Katy Perry — has been taken over by Citigroup. What happened?
- Newsletter sign up Newsletter
Citigroup has foreclosed on the debt-laden British record label EMI, home of The Beatles, Pink Floyd, Coldplay, and Katy Perry, among many others. The company was bought in 2007 by private equity firm Terra Firma, but was taken over by Citigroup after it became clear the parent company could no longer service its debt. How did EMI come to this — and what will become of the popular acts it signed?
What is EMI?
The iconic record label became synonymous with the British music scene over the second half of the 20th century. It signed acts such as the Beatles, the Rolling Stones, Coldplay, and Radiohead, and famously signed and then dropped the Sex Pistols. EMI is also the owner of subsidiary record labels Parlophone and Virgin. Along with Universal, Sony, and Warner Music Group, it is one of the remaining "big four" record labels.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
When did things start to go wrong?
Almost all commentators agree that EMI's problems started with its sale, for $6.5 billion, to private equity firm Terra Firma in 2007. The new owner's focus on cost-cutting and restructuring prompted the Rolling Stones, Radiohead, and Paul McCartney to leave the label in protest. But that was just the first of Terra Firma's miscalculations. "EMI stands for Electrical and Musical Industries," says Neil McCormick at The Telegraph . But recently, its employees have come to know it as "Every Mistake Imaginable."
What kind of mistakes did Terra Firma make?
Where do you want to start? asks Alain Sherter at BNet . For one, "the timing was lousy." Terra Firma bought EMI "at the top of the bubble," and for far more money than it was worth. What's more, the new owners "swamped EMI with debt," borrowing billions even as the company struggled to remain in the black. As soon as they bought the label, the music industry collapsed — and "EMI sales plunged." Even worse, says the Telegraph 's McCormick , they treated their musicians as assets to be streamlined and restructured. That was never going to fly in the "highly volatile and art-centered music industry."
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Did this reign of error have any plus sides?
Yes, says Helienne Lindvall at The Guardian . For all its faults, the owner turned EMI "into arguably the most progressive of the major labels when it comes to artist relationships," allowing smaller groups to "create a tailor-made partnership with the label." Terra Firma also forced EMI to become a "fiscally responsible operation," says McCormick at The Daily Telegraph . "It is currently the most profitable of all the major record companies, albeit from a smaller base than its competitors."
So what happens now?
For the time being, the bank will run EMI's operations — bringing the British label under American control, notes Businessweek . Citigroup will eventually sell it off to the highest bidder. "Perhaps most likely is a tie-up with rival Warner Music Group," says Bobbie Johnson at GigaOm . But EMI's problem isn't financial — it's that the music industry has changed fundamentally. "If that merger goes ahead, it will prove that the music industry is as clueless as it ever was" about how to adapt to the new reality.
Will EMI survive?
I doubt it, says McCormick at The Daily Telegraph . "Not so long ago there were over a dozen major record companies, but every few years another one disappears, consumed into the voracious maws of its competitors." Music lovers can only hope EMI's new owners don't carve it up "too brutally," says Luke Lewis at the New Musical Express . "It would be nice if EMI were to be remembered as a much-loved, generation-spanning record label — rather than a dispiriting cautionary tale in how not to run a company."
What about the bands?
Fans of Coldplay and Katy Perry shouldn't be too worried, says music industry analyst Bob Lefsetz, quoted by the New Musical Express . Established artists will be treated well by whomever ends up buying EMI. But new or upcoming acts signed by the label won't be so lucky. "If you're developing, you're screwed."
Sources: Daily Telegraph , Businessweek , GigaOm , Guardian , NME , BNet
Cartoons Artists take on textbook trouble, bizarre beliefs, and more
By The Week US Published 13 October 24
In the Spotlight The songwriter, singer and film-star has died aged 88
By The Week UK Published 13 October 24
In Depth Ceding the islands to Mauritius could allow China to gain foothold in the Indo-Pacific, experts have warned
- Contact Future's experts
- Terms and Conditions
- Privacy Policy
- Cookie Policy
- Advertise With Us
The Week is part of Future plc, an international media group and leading digital publisher. Visit our corporate site . © Future US, Inc. Full 7th Floor, 130 West 42nd Street, New York, NY 10036.
EMI agrees $4.7 billion offer from Terra Firma
- Medium Text
Sign up here.
Additional reporting by Yinka Adegoke in New York
Our Standards: The Thomson Reuters Trust Principles. , opens new tab
Futures mixed as investors await earnings; chip stocks slip
U.S. stock index futures were mixed on Tuesday as investors took a breather after a rally in the previous session, ahead of a slew of quarterly results from companies including Goldman Sachs and Bank of America.
- Work & Careers
- Life & Arts
Terra Firma and Citi target EMI debt
Limited time offer, save 50% on standard digital.
- Global news & analysis
- Expert opinion
- FT App on Android & iOS
- FT Edit app
- First FT: the day’s biggest stories
- 20+ curated newsletters
- Follow topics and set up personalized alerts
- FT Videos & Podcasts
- 10 monthly gift articles to share
Explore more offers.
Then $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.
Premium Digital
Complete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.
- Global news & analysis
- FT App on Android & iOS
- FirstFT: the day's biggest stories
- Follow topics & set alerts with myFT
- FT Videos & Podcasts
- 20 monthly gift articles to share
- Lex: FT's flagship investment column
- 15+ Premium newsletters by leading experts
- FT Digital Edition: our digitised print edition
FT Digital Edition
10% off your first year. The new FT Digital Edition: today’s FT, cover to cover on any device. This subscription does not include access to ft.com or the FT App.
Terms & Conditions apply
Explore our full range of subscriptions.
Why the ft.
See why over a million readers pay to read the Financial Times.
- Sign In / Register
- Fund search
- Investment Consultant search
- Placement Agent search
- Law Firm search
- Live Fundraising Chart
- Institution Profiles Index
- Private Equity Data
- Investor Calendar 2024
- Update your database profile
- Law firm data submission
- Database key terms and methodology
- Fund performance methodology
- Side Letter
- Friday Letters
- Guest Comment
- The Democratisation of Private Equity
- Private Markets and the End of Cheap Money
- Disruption Matters: Building resilience in turbulent times
- LP Perspectives 2024
- Meet the LP Series
- The A-Z of Impact Investing
- Secondaries
- Performance
- Private Equity Professionals
- Private Equity Deals & Transactions
- Global Investor 150
- 21 Changemakers
- The Rainmaker 50
- PEI Fund Formation League Table
- Behind the Numbers
- Special Reports
- Private Equity Fundraising Reports
- Private Equity Investor Reports
- LP Perspectives Portal
- Private equity events
- Global events calendar
- FEATURED TITLE: Inside the Fund Management Firm
- BEST-SELLER: The LPA Anatomised
- BEST-SELLER: Private Market Fundraising
- BEST-SELLER: Private Equity Accounting
- BEST-SELLER: The Definitive Guide to Carried Interest
- See all books
- Sign-in FAQ
- Suggest a story
- Take a tour
Nearly there!
A verification email is on its way to you. Please check your spam or junk folder just in case.
Need help signing in?
Issues with signing in? Click here
Don't have an account? Register now
HSBC’s private banking arm targets global GPs with co-investment financing product
Side Letter: Ardian’s record-breaker?
Side Letter: Private markets fundraising data
Side Letter: A secondaries ‘catch-all rocket ship’?
Terra firma and emi: 'new trial, new evidence'.
Terra Firma returns to court today seeking damages of around £1.6bn from former banking partner Citi.
Create an account to continue reading
Gain instant access to our expert editorial analysis and in-depth insight., already have an account sign in.
- Sign In FAQ
- Privacy Notice
- Cookie Notice
- Terms & Conditions
Register now
Get limited access to our industry news, analysis and data, plus regular email updates
To register, please review and accept our terms and conditions and privacy notice .
Sign in to your account
Email address not recognised.
Don't have an account? Click here to register
Copyright PEI Media
Not for publication, email or dissemination
COMMENTS
Guy Hands, the founder of private equity group Terra Firma, on Thursday lost his multi-billion dollar lawsuit against US bank Citigroup in New York, which he brought after he alleged one of its senior bankers misled him over his 2007 takeover of the music group, EMI.
The ill-fated investment in EMI ultimately cost investors in Terra Firma's second and third funds around £1.6 billion ($2.3 billion; €2 billion), which the firm is seeking to win back from Citi in the courtroom.
Almost all commentators agree that EMI's problems started with its sale, for $6.5 billion, to private equity firm Terra Firma in 2007. The new owner's focus on cost-cutting and restructuring...
EMI, the world’s third-largest music group by sales, said it had agreed a 265p-a-share cash bid from Terra Firma, run by Guy Hands, hours after the buy-out group made a final, sealed bid ahead ...
Terra Firma, the private equity house run by Guy Hands, has written its investment in EMI down by 90 per cent as it offers to put another £1bn ($1.7bn) into the struggling music group to...
In this paper, we explore the extent to which the private-equity business model (PEBM) stands either on “terra firma” or “shifting sands.” We employ three organizing concepts to structure our position on the nature of the PEBM: stakeholder arbitrage, earnings capacity and financial leverage.
In this paper, we explore the extent to which the private-equity business model (PEBM) stands either on “terra firma” or “shifting sands.” We employ three organizing concepts to structure our position on the nature of the PEBM: stakeholder arbitrage, earnings capacity and financial leverage.
British music company EMI <EMI.L> agreed to a 2.4 billion pounds ($4.73 billion) cash takeover from private equity group Terra Firma on Monday in a surprise move that could finally shut out...
A formal proposal has yet to be submitted but Guy Hands, head of Terra Firma, is offering to inject up to £300m of fresh equity in EMI, home to Katy Perry, the Beatles and Pink Floyd, while...
Terra Firma will return to court this morning as the firm seeks once again to win damages worth £1.6 billion ($2.3 billion; €2 billion) from Citi in connection with its lost investment in music group EMI.