Looks Into Major Minds

Interviews with execs from EMI and Unversal:

EMI Group was once hailed as the music company that brought the world the Beatles, Frank Sinatra and Nat King Cole.

But by the time record veterans Alain Levy and David Munns took over the British company’s struggling music operations last October, employees were joking that EMI stood for “Every Mistake Imaginable.”

Levy became chairman of EMI’s Recorded Music division, and Munns vice chairman. Their arrival followed a decade-long string of profit warnings, management shakeups and financial setbacks at the world’s third-largest music company. Last year EMI posted a loss of about $310 million.

After slashing 1,800 jobs, firing 400 artists and shutting down several record labels, Levy and Munns are finally putting some hits on the charts by such new acts as Norah Jones, Coldplay, Kylie Minogue and the Vines.

But the industry is suffering from piracy of music over the Internet, which is slowing CD sales. Levy and Munns, who previously transformed PolyGram, spoke candidly in their first joint interview about EMI’s problems and other troubles facing the music industry.

Question: EMI was a mess when you took over. The stock market now values EMI at about a third of what it was worth during the mid-1990s. How do you deal with that?

Levy: It’s very annoying to see the valuation put on record companies these days. The market is based on perception, and people now have a perception that the music industry is doomed. Is that the reality? I don’t think so. The only thing to do is work hard to build a quality music catalog for the future.

Q: Before joining EMI you took a break from the music business. What looked different when you returned?

Levy: What struck me most was how the music business is a world in itself, one where executives are often richly rewarded–even when they fail. In other industries, people understand that when [sales] go down by 10%, you take a salary cut. When the market is down here, these guys think it’s everybody’s fault but their own. When we arrived, we could see there was a total disregard for the shareholders in this company.

Some of these executives make the same amount of money as the heads of investment banking firms–plus they demand a guaranteed bonus, even if they fail to make a profit. We put a stop to it here…

They’re called Universal for a reason. Universal Music Group’s Q4 release schedule is nothing short of history-making in breadth and depth. And amid the group’s many upcoming platinum-artist releases is something for everyone: rock from Bon Jovi, U2 (greatest hits), Nirvana (retrospective with previously unreleased “You Know You’re Right”), Three Doors Down and Sum 41; hip-hop from Eminem (8 Mile), Jay-Z, Ja Rule and DMX; R&B from Dru Hill, Ashanti (remixes) and the Isley Brothers; country from crossover queen Shania Twain and pop from Mariah Carey and Now 11.

And those are just a few highlights. Before the end of the year, the world’s largest music group – currently sporting record marketshare of 30.6% – will release nearly three dozen albums from established artists who have previously sold 300k or better. And that’s not counting developing artists and soundtracks. UMG also has four of the top five 2002 albums to date, which so far have been good for more than 14.5 million OTC sales among them: Eminem’s The Eminem Show, Nelly’s Nellyville, Ashanti’s Ashanti and the O Brother ST.

“The labels have done a fantastic job not only coordinating schedules but setting these records up,: UMVD chief Jim Urie enthuses. “We’re also benefiting from the artist development work we’ve done all year. Puddle of Mudd, New Found Glory, Jimmy Eat World and Hoobastank are carrying over from the first three quarters and are now paying off. It’s all coming together at the right time.”

And now, a few words from the man who, since Seagram’s acquisition of PolyGram, has presided over the creation and increasing success of the largest music enterprise on the planet. Here’s HITS’ own lunchroom market (and sandwich) analyst Roy “Vey” Trakin with the pitch:

UMG remains red-hot, with 30% marketshare and a record-shattering $1 billion EBITDA. To what do you attribute that success?
I attribute our success to the executives who run our various divisions. Because of their talent, we have the greatest fourth quarter we’ve had coming up – I actually think we’re going to increase our marketshare.

Is it good for the business to have a single music group dominating the landscape like UMG? Consolidation hasn’t exactly been the best thing to happen to the radio industry.
The difference is we built this company gradually, over eight years – we didn’t just buy it. Actually, when we first acquired PolyGram, our marketshare was around 20%

You’ve repeatedly given credit to your executive team for the company’s success.
There’s a certain vibe that runs through our company; it’s about being thoughtful, reasonable and treating people well. This is a place where the artist comes first. What we’ve done is put incredible entrepreneurial people in charge of helping artists’ careers and given them the autonomy to do so….