Music Ally

EMI has lost the court case in which Pink Floyd argued that the label was not allowed to sell the band’s albums ‘unbundled’ on digital music stores – the latest blow in what’s turning into a nightmare week for the label.

High Court Chancellor Sir Andrew Morritt agreed with Pink Floyd that a clause in their contract with EMI expressly prohibited the label from selling their albums in “any configuration other than the original configuration” – as their lawyers put it – which includes allowing people to buy individual tracks on iTunes and other stores.

The contract was signed in 1999, and EMI had argued that the clause only covered physical recordings. Now the label is faced with the prospect of removing the band’s back catalogue from digital stores, or at least negotiating new deals for the albums to be sold unbundled.

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Sparks flew in court yesterday in the dispute between Pink Floyd and their label EMI. The case focuses on how online royalties for the band’s back catalogue have been calculated, as well as the way albums have been sold ‘unbundled’ as individual tracks.

The band’s contract with EMI was last renegotiated in 1998-99, before digital sales took off, at a time when – in QC Robert Howe’s words – “It was unclear whether record companies would be selling direct to the consumer or through retailers”.

It’s the unbundling aspect that has irked the band most, seemingly. “It is a matter of fact that the defendant has been permitting individual tracks to be downloaded online and that therefore they have been allowing albums not to be sold in their original configuration,” said Howe, suggesting that this is against the terms of the band’s contract. A ruling is expected on Thursday.

As Terra Firma fights to convince investors to pump another £120 million into EMI to prevent the company falling into the hands of bank Citigroup, EMI Music CEO Elio Leoni-Sceti has been talking about planned changes in the coming months.

According to the Telegraph, it’s aiming to save tens of millions of pounds by investing in new systems, and reducing the company’s headcount further. “We will present a compelling new five-year business plan with particular focus on the coming year,” says Leoni-Sceti.

“It will involve both an acceleration in revenues coming from product innovation at EMI Music Services and some cost reductions from the introduction of new systems and technology and the elimination of some duplication. This will confirm our vision to evolve into a digitally-led music company”.

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Pretty bad, judging by this blog post from the BBC’s business editor Robert Peston, who knows a thing or two about bad banking deals after the last couple of years. He’s outlined what he describes as “one of the biggest-ever losses on a private equity investment”.

In a nutshell, he says that EMI’s results for 2009 will show earnings before interest, tax, depreciation and amortisation of around £300 million. Which translates into a notional value for the recorded music business of around £1.8 billion – or $2.8 billion.

Yet the takeover was financed with $3 billion of equity from Terra Firma and partners, and $5 billion of loans from US bank Citigroup – with Terra Firma injecting a further $500 million of equity last year.

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2010 is shaping up as a big year for mergers and acquisitions in the digital music space, continuing the trend seen in the latter months of 2009, when the likes of Lala, Imeem and iLike were all snapped up, for varying amounts. So which services and startups might be under new ownership this time next year? Here’s some of our predictions.

eMusic

You don’t have to be a soothsayer to suggest that eMusic may be bought in the near future – the company effectively admitted it was open to offers (i.e. shopping itself to potential buyers) just after Christmas. Boss Danny Stein told the New York Post that “We’re opportunistic stewards of capital… If an offer was made that created value for our shareholders we’d listen to it.”

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We continue our look through Music Ally’s ten year archive of digital music insights with a piece from March 2001 examining the major labels’ digital music strategies.

Sign up for a free two-week trial to Music Ally and get access to all our past reports and bulletins plus a suite of research tools including market data, a deal tracker and an analyst forecast tracker. In the most recent PDF Report you can find a rundown of 2009’s big events plus an extensive timeline detailing the key digital music happenings of the past ten years.

And continue reading after the jump to see what we thought of the majors’ digital strategies back in ‘01…

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As part of Music Ally’s series looking back at a decade of digital music, we will be digging some really memorable past features out of the archives. Today we re-publish an article from our November 2000 report which examined the digital strategies of the four major labels  (this was four years before Sony and BMG merged) and particularly the online music brands in which they owned equity.

Sign up for a free two-week trial to Music Ally and get access to all our past reports and bulletins plus a suite of research tools including market data, a deal tracker and an analyst forecast tracker. In the most recent PDF Report you can find a rundown of 2009’s big events plus an extensive timeline detailing the key digital music happenings of the past ten years.

And continue reading after the jump to read our 2000 report on major labels and their stakes in various digital music services…

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Private equity firm Terra Firma has launched a lawsuit against Citigroup, the bank that financed its acquisition of EMI in 2007.

It’s accusing the bank of misrepresenting “fundamental facts” about the process leading up to the sale – including the existence of other bidders and how much they would have paid. The news comes weeks after Terra Firma tried to convince Citigroup to write off £1 billion of loads in exchange for Terra Firma injecting a similar sum in new equity.

The stakes are high: yesterday, the Observer described “fears within Terra Firma that EMI could default on interest repayments to Citigroup”, which could lead to the bank being forced to take over the business.

EMI has become the first major label group to make concerts and music videos available on US licensed video service Hulu. The deal will kick off by featuring the entire repertoire of Norah Jones music videos including exclusive content from her new album The Fall. Videos from Virgin, Capital and Blue Note among other EMI labels will be available on Hulu, the streaming video site set up by US studios NBC, Fox and ABC.

EMI has confirmed that it is suing US digital music store BlueBeat for copyright infringement, following news broken by Music Ally last week that it was selling Beatles albums as MP3s without a licence. However, intriguingly, EMI has also announced plans for the first ever legitimate digital distribution of the Beatles back catalogue – via apple-shaped USB drives.

BlueBeat first: EMI confirmed to Wired’s Epicenter blog that it has filed the copyright infringement suit against BlueBeat in a California US district court. The label had previously expressed anger at the news that the Fab Four were being sold online without its permission.

But what about those USB drives. EMI and Apple Corps made the announcement last night, revealing that they will sell 30,000 apple-shaped devices, with the 14 recently-remastered Beatles albums preloaded as FLAC and MP3 files. They go on sale on 7 November in Europe and 8 November in the US, with a price point of £200 in the UK and $279.99 in the US.