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EMI 'goes indie'

When financiers do A&R

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Comment A memo from EMI's new owner has got the music digerati very excited. In recent years they've been hoping some of the lovely lolly that's been lubricating the City of London would flow their way. Now their wish is coming true - and it might not be what they wanted after all.

Guy Hands, whose private capital investment company Terra Firma acquired the label earlier this year, says he wants EMI to "act more like venture capitalists", according to a memo "leaked" earlier this week.

In our experience, acting like VCs means throwing money at hopeless dot.com start-ups - pick a card, any card! - while convincing the press that there's a New Economic Paradigm just around the corner. This might be "Pen Computing", or "Web 2.0" - it doesn't really matter. The trick lies in creating the demand - then making a sharp exit. They're really PR companies spending someone else's money.

But this doesn't map onto business models that fulfill a demand for cultural goods - especially not a large 21st century "entertainment" company. Did major record labels invent punk or acid house? Of course not - the best they could do was fulfill demand that already existed - usually with a load of cheesy ripoffs. Culture always remains a few steps ahead of the entrepreneurs who try and monetise it.

So the VC model is a lousy one for music: so long as sound recordings have value, record companies need artists they can milk for decades. Dead or alive, it doesn't really matter.

The most surprising part of Hands' memo is where he indicates that EMI should be prepared to let these prize assets go.

"Why should [established acts] subsidise their label's new talent roster — or for that matter their record company's excessive expenditures and advances?" he asks.

One of EMI's most bankable outfits has already done so. Radiohead released its new album Ten More B-Sides this week, clocking up more than one million downloads. Radiohead's bag of riffs and tropes varies little more than Status Quo's, it's just as dependable - and there's nothing wrong with that - for businesses it's what makes them so attractive. But if Hands is to allay fears that he's not just a quick turnaround merchant, he needs to keep them in the stable for longer. Perhaps giving these acts the kind of deal Madonna won with LiveNation this week - where she bags revenue from concert tickets, merchandise, as well as the sales of sound recordings.

From this memo, Terra Firma doesn't so much look like an asset stripper, as someone shooing the assets out of the window, as if they're flight-fearful pigeons.

A-ha, you're thinking. The money men have been in charge of the major labels for years now, and acting like it. The recent tendancy to cut their losses and ditch promising acts after their first album undermines the boast that major labels have a "nurturing" role.

But we're about to find out what happens when real financiers are in control - at which point major label executives might start to look back nostalgically at the frying pan they've just jumped out of. ®

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