Sunday, July 29, 2012

Zelnik, Grainge and the damage done to indies

by Emmanuel Legrand 

You have to give it to Lucian Grainge – he's a master strategist. He's managed to destroy the united front of indie labels opposing the acquisition of EMI Recorded Music by Universal Music Group by offering a few tokens. And in the process has left scars within the indie movement that will be tough to heal.  

As soon as Grainge made his intentions public, interested parties started to express interest for bits an pieces of what used to be the EMI empire: Daniel Miller said he wanted to buy back Mute, Laurence Bell at Domino, Ministry of Sound and Kenny Gates at PIAS said they would consider bids, BMG Rights Management wanted Parlophone. But even before Grainge made his move, Patrick Zelnik said mid-July that he wanted Virgin, with a little help from Richard Branson, and that he supported the deal (in his July 16 FT op-ed, he wrote: “I can see that in the right circumstances this merger could create a more competitive industry, while offering stability to EMI’s artists.”)  

No wonder why Helen Smith, executive chair of Impala, said in an internal memo to the members of European indie labels' organisation, revealed by the NY Times, that this had been “one of the most trying weeks of Impala’s life.” In Brussels, Impala re-affirmed its opposition to the merger through a vote of its board (although a majority of its members voted for), but Zelnik's announcement that the deal would not be against the interest of indie labels created confusion. Suddenly, the champion of the cause was backing the wrong horse. To add insult to injury, Zelnik called Impala a "bureaucratic organisation" in an interview with Billboard.

Zelnik combines a deceiving Woody Allen look with an impressive intellect and is very good at winning difficult battles. When he set up Virgin Stores in France, he fought tooth and nail to win the authorisation to open his flagship store on the Champs-Elysées on Sundays. Conversations with him can be a bit disjointed as he jumps from one thought to another but they are always stimulating.

After setting up Virgin in France, he launched Virgin Stores and later created Naive, a independent music company (for the record, he signed Carla Bruni long before she met French president Nicolas Sarkozy). He has been a towering figure at Impala, alongside Beggars' Martin Mills and PIAS' Michel Lambot. In terms of split of duties, Zelnik was the ideologist, Mills the strategist and Lambot the spin doctor.

It is fair to say that his efforts in 2001 and the way he rallied the independent movement behind his opposition to the proposed merger of EMI and Warner was a defining moment for the indie community. It was, he said then, a matter of principle to avoid the creation of a dominant player that would change the balance of the marketplace. During his crusade he was some sort of loner against the armies of lawyers and executives that his opponents would line-up in Brussels – but eventually his views prevailed and the merger was soon off the table.

Zelnik also challenged the Sony/BMG merger, but was not successful in preventing it. Throughout these processes, Zelnik was always a passionate and articulate voice in outlining the dangers of a market concentrated into too few hands. So what happened? Can someone change opinion so radically and trade a bag of principles for a little more than a lentil stew?

A cynical top Warner executive dismissively told me a few years ago that everybody has a price and that he understood too late that if they had negotiated beforehand with Zelnik, Mills and Lambot and agree to sell them bits and pieces of EMI, he would have won their support, and the merger would have been cleared. (And how different would things have been for the music sector...)

In the aforementioned Billboard interview, Zelnik said that "Only fools never change their mind!". A source with good knowledge of Zelnik believes that Zelnik is looking for a way out from a business perspective since Naive is in a shaky financial situation. A joint bid Zelnik/Branson for Virgin (which, it must be noted, does not appear in the list of assets that Universal plans to divest from that EMI CEO Roger Faxon listed in a memo to staff) would allow Zelnik to merge Naive with Virgin and after a few years sail away in the sunset.

Whatever the outcome, damage has been done, and it will take more than a few lentil stews to pacify the sector. 

[Typed while listening to 1969 vintage soul by Barbara Lewis ('The Many Grooves of Barbara Lewis' on Stax) and Marconi Union's 'Different Colours' (Just Music) and keeping an eye on the Olympics]

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