EMI Group Split Between UMG And Sony

Four years after the whole label sold to Terra Firma for £4.2 ($6.69) billion, now one half of EMI Group – the record music division, EMI Music – is being sold by Citigroup to Vivendi’s Universal Music Group for £1.2 ($1.91) billion.

The remaining music publishing division will be sold to “a group spearheded by Sony (NYSE: SNE) Corp.’s music division” for $2.2 (£1.38) billion according to WSJ sources.

The difference between the total price and the 2007 price underscores the decline in music industry value.

After its sale to Terra Firma, an attempt to kickstart digital innovation inside EMI Group appeared to false-start. Google (NSDQ: GOOG) and Linden Labs executives Douglas Merrill and Cory Ondrejka, hired to lead that charge, ended up leaving after their digital unit was subsumed to be a function of the marketing department.

UMG’s global digital president Rob Wells is a big champion of unlimited-access services like Spotify and this week criticised as “irritating” how EMI’s Coldplay is withholding its latest album from streamers.

EMI Group’s recorded music division – home to Coldplay, Beastie Boys and Katie Perry – makes money by sales of music, the music publishing division by exploiting rights to compositions it owns by way of royalty fees. LA Times: “In a surprising move, Warner Music walked away from the auction after failing to agree to terms for taking over EMI’s pension liabilities.”

Citi took control of EMI Group after Terra Firma could not pay it back the money it used to finance the 2007 acquisition.

Vivendi (EPA: VIV) won’t get in to the problems Terra Firm did; it says it can finance the buy from existing credit lines. But it does disclose one major point as a cryptic, penultimate line in its announcement: “Vivendi and UMG will also sell 500 million euros worth of non-core UMG assets.” The assets are not specified.

Sony, however, is taking more than $1 (£0.63) billion from UBS for its buy, an LA Times source says. EMI Music is selling for 7x its own EBITBA.

With physical sales continuing to fall to the point of an imminent crossover in physical and digital music revenue, and with growth in a la carte digital downloads having slowed to a crawl, record labels are again keen to make money through music publishing licenses with services like Mog, Rdio, Rhapsody and Spotify, the latter of which labels actually own equity in.