What does EMI sale mean for digital music fans?

The music company that owns the Beatles collection and is home to such music acts as Katy Perry and Coldplay is being broken into pieces and sold to its biggest competitors. Is this bad news for Web music?

Singer Katy Perry has been one of EMI's few hit acts over the past few years. Katyperry.com

Universal Music Group has paid Citigroup $1.9 billion to acquire the recorded-music arm of EMI, the once mighty British music company and home to such acts as Coldplay, Katy Perry, and the Beatles collection.

At the same time, Sony Corp., has obtained EMI's music publishing division for $2.2 billion. The Wall Street Journal reported the news this morning (subscription required).

EMI's Capitol Records Tower is a Hollywood landmark. Greg Sandoval/CNET

The company had struggled financially for years and Citigroup it took over earlier this year because of the $4 billion EMI owed it.

It's early and lots of questions have to be answered before assessing the deal's impacts to digital, and none are more important than whether these deals with pass muster with regulators in the United States and Europe. Will governments require UMG or Sony to divest of holdings? Will Warner Music Group, which is now the smallest of the top labels, raise a stink about the effects on competition?

But if the deals are allowed to go through, the breaking up of EMI will mean that even fewer people will have control of the the world's most popular music. The four major record companies, UMG, Sony, Warner, and EMI combined account for more than 80 percent of songs sold.

For technology startups, the deal means they will have fewer places to go in which to obtain popular music. For a company like Grooveshark, it just saw the controversial music service's one major-label partner get gobbled up by UMG, a record company that has accused it in a lawsuit of copyright violations .

EMI suffered while under the control of Terra Firma, a British private equity firm and that company's CEO, Guy Hands. Terra Firma couldn't lead the company out of debt and Hands' cost-cutting was hugely unpopular with some of the labels' marquee acts. Radiohead and The Rolling Stones left the label during Hands' tenure.

In the wake of Citibank's takeover earlier this year of EMI, CEO Roger Faxon was becoming something of a digital progressive. He helped negotiate an agreement between Apple and the Beatles that finally brought the iconic band's music to iTunes . The Beatles dragged their feet for years before releasing their collection online. Faxon has been supportive of cloud music and services such as Spotify.

Anyone hoping the loss of EMI will mean less money for the Recording Industry Association of America can likely forget it. The RIAA is the trade group that represents the now three big record companies but the dues that record companies pay to support the RIAA is based on market share. The more music a label sells, the more they pay in dues.

 

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