London – Major record label EMI, which has reportedly been
seeking to license its catalog as a means of making a crucial loan repayment,
has seen two potential suitors pass on such a deal while "last remaining
hope" Sony (NYSE: SNE) Music "is close to bowing out" as well, The Wall
Street Journal reported. EMI parent company Terra Firma is looking to raise as
much as $150 million to make a loan repayment to Citigroup, which helped
finance its $3.6 billion takeover of EMI in 2007.
One fundraising tactic EMI
has resorted to is potentially licensing its catalog to a competitor, who would
pay as much as $150 million per year for the rights to market and distribute
EMI titles in the U.S.
In addition to Sony, Universal Music Group was also reportedly in discussions
with EMI — which ended last week — while The Journal refutes an earlier
report that indicated Warner Music (NYSE: WMG) was in talks as well.
The Journal notes that
if EMI were still able to reach a licensing deal, it would "likely shut
down most of its operations in the U.S."
If Terra Firma and EMI
are not able to work out a licensing deal or raise funds via other means to
avoid defaulting on the payment, Citigroup could potentially "seize the
company, break it up and sell it."
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(WSJ)
This is sad, but it a warning sign about the state of the record industry. It is impossible for record companies to make the funds they once used to, and they haven’t curbed their spending to make up for the fact because they need to hold on to their talent – who still expect to be paid astronomical amounts.