Why the EMI Deal Matters A LOT to Book Publishing

Think carefully as you read this…

In Publishing, we used to call it the “Big 6.”  That is, until the sinking Thomas Nelson ship was sold to NewsCorp.  Now it’s the “Big 5.”

In music, they call it the “Big 4” – Warner, SONY, Universal and EMI.  Well, they did until today when the EMI soap opera ended with Vivendi and SONY each buying about half of the once proud label.  Today Vivendi, a French media and telecommunications company, said it was acquiring the recorded music division of EMI for about $1.9 billion.  At the same time, SONY’s music division said it would buy the publishing side of EMI for $2.2 billion.

That’s $4.1 Billion total, for EMI.  Now, way back On February 11th (a mere 8 months ago) Citigroup acquired EMI Group and recapitalized the major label group in a debt-for-equity swap. Translation: Citgroup took equity ownership in exchange for a BIG PILE of debt it was owed.  Yowzza!

What would become a rocky ride started in August 2007 with the $8.4 billion buyout of EMI by private equity firm Terra Firma. That acquisition was financed with debt from Citigroup, and it became obvious that Citigroup would be forced to take over when Terra Firma’s debt came due here in 2011.

$8.4 Billion paid for EMI in 2007… $4.1 billion paid in 2011 equals a loss of approx $4.3 billion over 4 years and 3 months…. SO, on average EMI lost $81 million in enterprise value per month over those 53 months.  Sound familiar?  Go back and read my post on Thomas Nelson, the 7th largest trade pub that was acquired by NewsCorp / Harper Collins.

This is sad for music because it is the end of an era.  EMI, Electric and Musical Industries, was formed in 1931 when Columbia Graphophone Company merged with the Gramophone Company (remember the image of the dog and his master’s voice?).  EMI’s history started with the origin of recorded sound.  Now they are gone.

Why does this matter?  

The music labels got to where they are today because they failed to successfully navigate the digital revolution/conversion.  Along the way, small labels and ‘indies’ got acquired by large labels and, until today, there were the “Big 4.”  

If you don’t think book publishing is headed in this same direction, you are simply not paying attention – or you refuse to pay attention.  The difference being directly tied to the logo on your business card. (No offense.)

Please note: I reserve the right to delete comments that are offensive or off-topic.

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