Citibank Takes Control of EMI

This just in from the AP…

LOS ANGELES (AP) Citigroup Inc. has taken over debt-strapped EMI Group Ltd., closing a disastrous purchase of the music label by Guy Hands, founder of British private equity firm Terra Firma.

The foreclosure by Citigroup, EMI's main lender, brings the label of British acts such as The Beatles and Pink Floyd under American control until a new buyer can be found.

The takeover had been long expected, but came more than a month before Terra Firma Capital Partners Ltd. officially defaulted on roughly 3.4 billion pounds ($5.48 billion) of borrowings it took on to buy the label in 2007.

Citigroup's move eliminates some uncertainty over EMI's future, and restructures EMI by reducing its debt by 65 percent to 1.2 billion pounds. Citigroup booked a 2.2 billion pound loss, while Terra Firma saw its 1.75 billion pound investment evaporate.

The agreement leaves EMI, which also represents Lily Allen, Katy Perry, Coldplay and dozens of other acts, with more than 300 million pounds of available cash, enough to fund its operations, and a sustainable level of debt.

For now, it won't have to rush into the arms of a financial savior, although companies like Warner Music Group Corp. and private equity firm Kohlberg Kravis & Roberts have been jockeying to buy the company.

EMI now has "the ability to invest in and grow its business," said Stephen Volk, the Citigroup vice chairman who will become the chairman of EMI's holding company, Maltby Acquisitions Ltd., in a statement. "This is a positive development for EMI, its employees, artists, songwriters and suppliers."

EMI's chief executive, Roger Faxon, said in a statement that the restructuring "has given us one of the most robust balance sheets in the industry."

Uncertainty over its future was seen as a major distraction for EMI, which in recent years lost business from the Beatles' Paul McCartney and rock band Queen.

The move also came after a jury in New York found in November that the U.S. bank did not fool Hands into buying EMI at an inflated price. Hands had testified that Citigroup dealmaker David Wormsley had misled him about the number of suitors for the label, while Citigroup said the accusations were an attempt to gain leverage in restructuring talks. Hands appealed the verdict earlier this month

The State of the Music Industry

The bleeding hasn’t stopped for the music industry as album sales plummeted 12.8% and digital track sales flattened to a meager 1% gain for 2010, according to figures issued Wednesday by Nielsen SoundScan. 

Album unit sales dropped to 326.2 million, from 373.9 million units in 2009. The 2010 drop nearly matched 2009's decline of 12.7%.

Overall album sales, physical releases and digital "track equivalent albums" -- fell 9.5%, to 443.4 million units from 489.8 million in 2009. This compared to a drop of 8.5% in 2009.

Just four albums sold more than 2 million units last year; the No. 10 bestseller, Ke$ha's "Animal," barely inched past the 1 million mark, with 1.14 million sold.

In terms of 2010 market share, Universal Music Group led the four majors with 31.4% of albums sold. Sony Music Entertainment ranked No. 2 with 27.4%, with Warner Music Group trailing behind with 19.8% and EMI Music a distant fourth with 9.6%. The independent sector outdid EMI with an 11.6% share.

Rapper Eminem claimed the 2010 album sales championship, moving 3.4 million copies of "Recovery." Country acts trailed only slightly among the top sellers: Lady Antebellum's "Need You Now" placed second with 3 million, while Taylor Swift's late-year release "Speak Now" came in a close third with 2.96 million.

Swift was the top-selling album artist of '10, notching total sales of 4.47 million, followed by Eminem (4.32 million), Lady Antebellum (3.85 million), Justin Bieber (3.73 million) and the cast of the Fox series "Glee" (3.6 million). Swift has sold more than 4 million albums per year for the past three years.

Just four albums sold more than 2 million units last year; the No. 10 bestseller, Ke$ha's "Animal," barely inched past the 1 million mark, with 1.14 million sold.

* news > LONG LIVE THE KING

Regardless of how you feel about Michael Jackson and his personal life, what he has done for the record industry since his death has been staggering. SoundScan numbers for 2009 are out and Michael again is king.

Market share by record label is pretty much stagnant these days since the advent of file sharing, the digital age and iTunes. At the end of 2008 Universal held the number one spot with 31.5% percent of the market, followed by Sony, 25.3%, Warner, 21.3% and EMI with 9%. Indie labels round up the rest of the sales claiming a little under 13% of the market.

Since his death in June Michael has sold over 10 million albums, catalog sales that rival the top artists with new releases. You don’t see him in the top ten charts because his material - previously released is considered catalog, a classification reserved for albums that have fallen off the charts. Michael’s catalog sales on their own lifted the record industry a staggering 2.8% in 2009 and gave Sony a nearly 3% market share edge.

While Universal is still at the top of the heap, it took the biggest hit losing about 1.3% of it’s market share. Indie labels also took a big hit with about the same loss of market and Warner followed with a .75% loss. Amazingly EMI was able to gain about .25% in sales on the larger labels. So, rounding out 2009 - Universal still sits at the top of the hill with 30.2% of the market followed by Sony now at 28.5%, Warner at 20.5% and EMI at 9.2%. Indie sales round out the market at just over 11.5%.

No doubt some execs at Sony have Michael Jackson to thank for their Christmas bonuses.