A new book by Music Ally’s Eamonn Forde digs deep into the demise of EMI as a standalone major-label, following its £4.2bn acquisition by private-equity company Terra Firma in 2007. This extract details the ambitious – but ultimately unfulfilled – plans to relaunch the EMI.com website as a digital-music service (something Music Ally covered at the time).
Going into its acquisition, Terra Firma knew that digital was the weakest part of the record business but also knew that digital was the only way to haul itself out of the hole it now found itself in. As such, the first major digital initiative for EMI under new ownership was going to make a statement.
It was going to be about the company regaining control of the means of distribution and retail that had been seized from it first by the arrival of online filesharing and then by the likes of iTunes.
This was very much Guy Hands’s pet project where he was going to show the other labels that EMI could rip up the rule book. He was also going to show the nascent legal digital services that he could play them at their own game and win.
“It would have been the first real streaming [platform],” he says of what his vision was, wilfully overlooking other services already in the market. “It would have been early. It got huge resistance from the business. I wanted to go out and get agreements with the other labels to do a streaming service, effectively unlimited and pure subscription, in 2007. So you would have paid a subscription fee and you would have got music unlimited. I wanted to get other catalogues in there or to do it as a joint venture.”
As this project was coming right from the top, it had to become a company priority. “Guy decided that was going to be the first easy win – a new website,” says a source at Wrights Lane on Terra Firma’s first big digital play.
The project was going to be a consumer-facing one, branded as EMI.com – offering a music experience for users. Beyond this, however, sources disagree on what, exactly, it was going to be. Therein lay its first big problem: what it was going to be and what it was going to do were never fully defined from the off.
Incredibly, EMI did not own the EMI.com domain name which, in 2007, was taken as a sign of just how far behind the company was. It operated with the emimusic.com address and @emimusic.com format for emails, but another company had beaten it to the ownership of EMI.com and so a deal had to be struck for the music company to purchase the domain name and then start populating it.
One digital source felt making EMI.com a consumer destination was a waste of effort, resources and budget that really should have been used internally at EMI to ensure it was futureproofing itself for how digital would change it on a business-to-business and workflow level.
“One of the things that they did do that I thought was wrong was hiring a whole development team on the West Coast,” they suggest. “They were fixated with building things – be it EMI.com or different apps. My view is that that isn’t the role of a content business. The role of a record company is to service its artists as best as it can. That was a big distraction and I wouldn’t have advised them to do that. There are things that you need to build – things like good asset-management systems and good data-recording systems. But consumer-facing platforms that are all built by one record company? We all tried that in the 1990s in the first dot.com boom and quickly realised that this is not what record companies do.”
The same source claims that any attempts to persuade the new team being put in by Terra Firma to reconsider investing in this project or focus their energies on other things that needed to be fixed first were ignored or rebuffed.
“Did I try and persuade them otherwise?” they say. “Yeah, but they were completely fixated on it. They wanted to invest more, develop more and do more stuff. We had got a business that was falling apart and we had problems with artist liaison. We had real problems with A&R. We had real problems with the actual business of being a record company. And they had armies of people wanting to build EMI.com? I just felt that they were fiddling while Rome burnt. It’s just a lack of experience.”
Consultant Shamsa Rana was brought into the company in summer 2007 to take charge of what eventually became EMI.com and also to advise on other digital opportunities that she spotted in a music market and a digital landscape that were both dramatically in flux. Her background was in digital consultancy, having previously worked at KPMG and online bank Egg before setting up her own company to work with private equity and venture capitalist companies on their digital strategies.
“When Terra Firma was looking to buy EMI, Guy reached out to me to do some initial due diligence,” she says. “That was around the digital side of things in terms of where the future of music was headed. My due diligence was not on the company itself but around the future of music.”
She says she was “obsessed” at the time with futurist Gerd Leonhard’s 2005 theory of ‘music like water’5, which essentially argued that music would become a utility, much like water, gas and electricity in the home, and would be available everywhere for a monthly fee.
Her first job for Terra Firma was doing an audit of emerging models in the digital world that Terra Firma should be aware of and possibly even look to acquire. She claims she put forward both music-recognition company Shazam and the nascent Twitter as possible acquisition targets for Terra Firma/EMI.
“The other part was around how EMI could position itself for the future,” she says. “I advised Guy to focus around digital distribution. It was not to move everything from physical to digital but to focus around digital partners. To focus on online players who were distributing content – so focus on third-party partnerships. And to focus around potentially having a direct-to-consumer offering as well.”
“Guy was a key driver behind EMI.com – and that’s really important for you to know,” says Rana. “He believed in it before anyone else did. The purpose of EMI.com was threefold. One was to really begin to build a relationship with consumers that focused around our artists and actually present to the world who our artists are. What you had was a fragmented world where artists had their own music websites or they were working with Apple or someone else. The quality of the offerings varied and there was a lack of consistency in what consumers were able to do, we wanted to provide more functionality to artists and consumers. The second element was to learn. It was to learn what was going on with regards to how people consume music, which artists they were interested in, the type of content they are interested in. The third element was around streaming of music. There was never any interest in providing people with another direct-to-consumer downloading world.”
Avoiding downloading and going for streaming in 2007 was either a reckless move or an incredibly prescient one. Downloading was the only growth engine for recorded music at the time, and streaming, while it existed with services like Rhapsody and the fully legal incarnation of Napster, was an incredibly niche activity.
It would take several more years – driven by Spotify’s sharp growth as well as Apple’s move into subscription with Apple Music in June 2015 – to go mainstream. EMI.com was intended as a very early effort to get the company a first-mover advantage when the consumption of digital music moved from an ownership-based model to an access-based one.
Except Spotify was able to explode as it had, barring the occasional superstar hold-out, by licensing 30 million-plus tracks from all the major labels and pretty much every independent that existed. EMI.com, in contrast, would initially only have music from EMI artists. And as the smallest major with a market share that barely made it into double-digit market share, it was already on the back foot.
Added to this, it was not going to be squeezed into any revenue model. There would be no subscriptions and the music would not be paid for by ads either. Unlike Spotify’s ‘freemium’ strategy (a choice of the free tier with limited functionality and regular ads or the paid tier that had no ads and much richer functionality, including offline play on mobile), this would be completely unmonetised.
“It was not ad-supported; it was absolutely a free offering,” says Rana. “It was very much to build relationships between artists and consumers. We only developed it for a desktop experience but it could have gravitated towards a mobile experience.”
She adds that it was about EMI having a cohesive identity online and the end goal was less about earning money off every stream and more about gathering data on people’s consumption patterns and using that to build a tighter and richer relationship with them that could be monetised elsewhere.
“It was a direct-to-consumer offering and we wanted the data in terms of how people engaged with the music [as well as] what they were most interested in in terms of different styles and different artists,” she explains.
“It was also an effort to really professionalise the websites that were available for different artists. Some of them were very good in terms of being able to stream music; but on the whole they weren’t very coherent in terms of the information that you could get, the ability to stream music, the ability to look at pictures and all this other stuff.”
Data, for Hands, was where it could really come into its own, envisaging it as a central hub for acts to plug all the other social sites and web properties into. “It would have been like Goodreads for music,” he says. “You could discover new music, you should go and connect with the artists, it would be open source so you could put your own content on there. My view was that it could really transform music in terms of saving costs and getting A&R on it.”
This was, some crowed, basically a ‘me-too’ version of MySpace – but four years after MySpace. It was, they felt, a digital gewgaw that exposed how woefully out of its depth Terra Firma was digitally.
“The great white elephant”, is how one source who saw the different iterations of EMI.com described it. “They were going to turn it from a website into a D2C (direct-to-consumer) site and allow all of the music on the catalogue to be streamed there. It was not a bad idea – but just a bit too early and impossible to execute.” In brief, they felt the underlying idea was solid, but that was all lost as the idea developed and more limbs were stitched onto it.
“I thought it was a good idea – if it was designed right,” says the same source. “The fact that you could let the EMI catalogue be effectively sampled [by consumers], that was pretty forward thinking. But there were some wacky things around it. They wanted to build the celestial jukebox for the record industry. I asked what they were going to do about the other content. They said if someone searched for Beyoncé – as she was on Sony – they would have the tracks there but the user would have to be sent off somewhere else to hear them. I said, ‘We’ve got a problem.’ Did they not understand cross-licensing? No, they didn’t understand pretty much anything.”
Hands was confident that, when it was up and running, the other labels would be willing to strike a deal. Many, however, saw the name as a barrier here as Universal, Sony and Warner were not going to be happy to license music to a service branded in the name of a rival label.
“The name [EMI.com] was an irrelevance; the name was just what we were using,” counters Hands. “It was like a working title. We needed to see if we could technologically do it. I didn’t give a damn what the name was. You could have called it any name you wanted. We had one person who did try and think of all sorts of different names for it. You wanted something like music.com but that was already taken. I don’t think we ever got to the point where the technology was good enough that we could have actually given the streaming service a name.”
Sources claim that Hands was massively inspired by a pre-release BitTorrent tracker called OiNK, which emerged in 2004. It was an ever-evolving database of, in this case, unlicensed and shareable media files that sat on a variety of peer computers and facilitated the accessing of them by other users. It was eventually shut down in October 2007 as a major source of pre-release album leaks,7 so it would have dominated industry headlines in Hands’s opening weeks at EMI. “OiNK was the thing inspiring Guy at the time,” says a well-positioned source. “He wanted to build an OiNK.”
They argue that Hands’s legal version of OiNK was symbolic of what was to follow – a good idea in essence, but one that was implemented poorly. “He wasn’t that much of an idiot in terms of the strategy,” they say. “He was spot on. He just couldn’t execute it. That started with EMI.com which was a dog’s breakfast of a project.”
Even Mark Hodgkinson, an executive brought in by Terra Firma, so not as knee-jerkingly critical as EMI employees could be, was unsure it would ever fly. “To be very straight with you, I was a bit sceptical about whether or not it would work,” he says. “The problem with EMI.com was that you would only have a quarter of the music.”
Despite all the negative feedback percolating through the EMI team, Rana forged on, with Guy’s complete backing, with the project. This was partly because Hands saw it as an asset to be nurtured and, ultimately, sold for a considerable profit. “I am convinced that if we had done it and we had done it cheap enough, we would have got ourselves enough members,” he says of his quixotic ambitions for the platform. “And if we got enough members, we would have been able to sell it to someone like Google. I am absolutely convinced that it would have worked.”