Friday, September 17, 2010

Faxon marks his territory at EMI – but time may be running out

By Emmanuel Legrand


Could there be a more damning indictment of the Guy Hands/Terra Firma era at EMI than the 5-page memo its new group CEO Roger Faxon sent to the company’s staff last week?

One could argue that the appointment of Faxon in itself was Hands’ biggest u-turn, as his contempt for the music biz establishment has been well documented. After the guy from consumer goods, the other one from TV, and God knows who else who was going to show the world of music how things should be done, Hands finally turned to the quiet one, the un-flashy one, the guy in the suit in the corner who had constantly delivered the good figures, and who could make Power Point presentations that even investors and analysts could understand. Why don’t we give it a try, must have thought Hands, probably out of despair.

For sure, Faxon ain’t a revolutionary, but be warned, he ain’t a softy either. If you want to witness a masterly exercise of deconstruction in action, just read his memo… For a start, Faxon asserts the obvious: EMI has to become “an artist-focused global rights management business”, and the structure and the people are at the service of artists. The key paragraph in the memo is the following: “We need to understand that we are not a product company at all -- we have to be a service company, and one that is obsessive about discovering great music (or rediscovering great music from our catalogue) and connecting it with an audience through every route available to us."

It comes as refreshing news after two years during which Hands and his cronies gave the feeling that the structure was more important that the creative aspects.

Faxon then proceeds to dismantle the top management structure (losing in passing some good people such as Nick Gatfield, EMI's president of new music for North America, the UK and Ireland; Ronn Werre, COO of North America and Mexico; and Billy Mann, president of new music-international and global artist management at EMI Music), but is putting an end to the multiple lines of reporting and bringing the company back to a simple geographic divide (North America, Latin America, UK/Europe/ROW).

In the process, Faxon appointed himself as head of the US operations, taking the dual position of global head and US boss which, to this date, has never been crowned with success at EMI (see what happened with Ken Berry or David Munns). It puts the CEO in the front line and makes him accountable for an important source of talent, revenues and profits. But then, he is American...

So Faxon knows the onus is on him to deliver success from the US that can then be pushed through the rest of the network globally. In a way, by shifting the centre of gravity of EMI to the USA (as exemplified by the soft – and apparently amicable – departure of London-based corporate communications guru Amanda Conroy last week), Faxon is probably doing EMI a favour in that the company will probably be under less scrutiny by the British media.

The new structure also creates a new powerhouse within EMI in the UK/Europe/ROW division, which is by and large EMI’s biggest unit. Its executive, David Kassler, is confirmed as one of the company’s most important operatives, and anointed as a potential successor to Faxon.

Staying with structure, Faxon announced the end of the Global Business Unit structure, known internally as “the Matrix”, which was the conduit between A&R and the rest of the world. Wrote Faxon, "While there is broad appreciation for the people and skills it has brought us, in trying to focus the business on the key business streams we seem to have created a confusing maze of accountabilities and responsibilities."

How delicately these things are said! Basically, the Matrix, which was supposed to be the organisational answer to EMI’s problems, the joker in Hands’ hand, had morphed into a maze (in plain speak – a fuck-up). It is not difficult to imagine the grin on Faxon’s face when writing that the “the matrix” was dismantled and had ceased to exist. Fact is that many executives at EMI saw the Matrix as a source of confusion and also of dis-empowerment, as projects they had nurtured were taken off their hands to feed the Matrix.

Who on earth could think that a “matrix” was the answer to EMI’s woes? Imagine the dialogue with the artists: “Hello Chris Martin, we need a new Coldplay album because we have to feed the matrix!” Maybe these were the same brilliant minds who added to EMI’s due diligence process before signing contracts with artists a long questionnaire, one which included asking if said artists were overweight and if a budget was required for a weight-losing programme… (We are not inventing it!)

Maybe these were the same brilliant minds that instructed headhunters not to recruit executives who had background in the music industry. One executive from a European country with over 20-year experience in the business once told this writer that he feared he would not get the job he applied for because he was told by headhunters that he was, well, too experienced…(He eventually got the job.)

When Guy Hands bought EMI, we wrote in RotD that EMI was obviously in need of an overhaul, but recovery would happen if the company’s three assets – its artists, executives and catalogue – were properly managed. But we also warned that artists were not cans of beans and required some special attention. So Hands went for the past few years into the deconstruction of EMI to build a new EMI, one that would not be hindered by the excesses of the previous regime.

We were supposed to see a new, mean and lean company, quick to react, artist-friendly and venturing into new worlds (understand streams of revenues). We heard lots good intentions, witnessed admirable visions, and saw executives coming and going at such speed (how many people have been in charge of the company’s digital strategy?), that it is admirable that there was still some business done.

So the elevation of Faxon as CEO of EMI Group, after long years in the shades of Marty Bandier at the publishing unit, is the revenge of the music biz nerds, of the guys in the backrooms who know the business but had to keep quiet while the guys in the front line who knew nothing were lecturing the world about how they would re-invent the music industry.

And Faxon is probably the right person for that – after all, hasn’t he been able to continuously improve EMI Music Publishing’s financial performance under Hands’ regime, despite the ongoing drop in mechanical revenues? Faxon knows how to extract revenues, and he has also configured the publishing unit for this purpose. He also knows that fresh talent is what brings in the goods.

Recent successes with Iron Maiden, Katy Perry and Lady Antebellum show that when given the right material, EMI’s team around the world can work hard and achieve success (but please spare us the trumpeting press releases each time an EMI act goes to No.1 in the US charts – this is what a music company is supposed to do!). As stated by Faxon, EMI now has to work for and with its artists.

But will Faxon have time? Business wise, he has a good window of opportunity, with Sony in dramatic need of leadership and new ideas, Universal waiting to see what Lucian Grainge will do (chop, chop, says the wind from LA), and Warner is going through another disruption with Lyor Cohen’s attempt to assert his power over Warner Bros.

But internally, Faxon will have to deal with scavengers looming over the sick body, shareholders expecting more than a penny in return for their investment, the conflict with Citi, the bills to the pension fund, and the cost of signing, breaking and developing talent. And that’s probably too much.

So we’ll conclude with a brief memo to Hands and his backers: Let Faxon and his team do their job without interference, for this is probably your last chance.

(This story was initially published in Record of the Day, Sept 16, 2010)

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