Much has been made of the precarious situation with EMI Music.
Earlier this week, EMI thought it had a deal with Universal Music Group to license its music in Canada, Mexico, and the US. If the deal had gone through, EMI would have been $400 million richer. EMI’s parent, Terra Firma, owes Citigroup $190 million by June 12th such a deal with UMG would have been a lifesaver.
But the deal fell apart in the middle of the night right before it was signed. What happened, we wondered?
It turns out someone had the presence of mind to check the contracts held by EMI’s biggest acts, starting with the Beatles. And the contracts forbid EMI to license their records to another company. Cue up “You Can’t Do That.”
It wasn’t just the Beatles. I’m told such provisions exist with Pink Floyd, Coldplay, Norah Jones, and a few other EMI acts.
But certainly the Beatles are EMI’s crown jewels. Without them, a license deal would be valueless.
Sources say that when the UMG folks realized this, they pulled out at the last minute. EMI then went to Sony, almost made a deal there until that gang asked the essential questions.
“Another reason, too,” says a source, “is that there was no guarantee that Citigroup wouldn’t wind up with EMI anyway, and that there would be no EMI in a year. A multiyear license would be meaningless.”
Both EMI and Terra Firma have until June 12th to come up with that $190 million. If they don’t, Citigroup will take over. At that point, one top insider surmises, the Beatles and others may try to leave. It could get interesting.
Of course, the irony is that EMI/Capitol is having a great run right now. If they weren’t under the mound of millions in debt, they’d be ok with Lady Antebellum selling like hotcakes.