EMI chief Roger Faxon has optimistic view of future of music business
Roger Faxon may head a British music company, but he’s no stranger to wild rides.
The 62-year-old chief executive of EMI Music was chief operating officer of Lucasfilm from 1980 to 1984, when the studio released “Raiders of the Lost Ark” and “Return of the Jedi.” Faxon then worked for Tri-Star and Columbia Pictures, where he was senior vice president in charge of marketing, distribution and finance.
He made the jump to music in 1990 as chief financial officer of EMI’s publishing business when the industry was at its peak and the Internet was a mere curiosity for academics.
It’s been a roller-coaster ride ever since. Ravaged by piracy, revenue from CD sales is half what it was in the 1990s. And digital music sales growth is starting to slow from double-digit gains over the last decade.
Meanwhile, EMI has changed owners multiple times. A leveraged buyout in 2007 by private equity firm Terra Firma Capital Partners saddled EMI with $5.4 billion in debt. When it became clear that Terra Firma would never be able to repay the loan, its banker, Citigroup, took control of the 113-year-old music company Feb. 1.
Throughout the turmoil, Faxon maintained his cool, and his job. The day after Citigroup became his new boss, Faxon spoke to The Times about what’s in store for the music business, and for EMI, whose catalog of artists includes Coldplay, Pink Floyd and Katy Perry.
Citigroup is largely expected to sell EMI before the end of the year. Will the bank keep the company intact or sell it off in pieces?
Breaking the business apart is really a step backward. The music business as we knew it is in slow decline. You need an idea that expands and builds markets. A global rights management is the way we will grow the business. To do that, you need to have both parts of the company working together.
How do you see that working?
The industry is suffering from a lack of perspective. You have to have a broader view. You can’t think the world is made of discs. We make music, and music touches consumers in vast numbers of ways. We have to look at music not as a thing but a set of rights that we manage into every possible channel. The ability to link recorded music and music publishing is essential to making that transition.
Do you think digital channels are the future?
Music is ubiquitous. It has integrated itself into so much of our lives. There are innumerable ways in which music reaches consumers. No one model, no one supplier, no one technology by itself can capture the essence of that transformation. Our focus is on how consumers connect with music and bring value to each and every one of those connections.
So how is EMI doing financially? Can we expect revenue and profit to grow this year?
We have a very strong underlying business, and with the Citigroup recapitalization, we have the strongest balance sheet in the business with two-thirds less debt and 300 million pounds [about $480 million] of cash to boot.
That said, the market has declined in the past year, and EMI wasn’t immune. What we have done is improve our margins and held our own. With regard to revenue, it would be hard to replace the sales we had a year ago [in September 2009] with the Beatles’ re-mastered release. A substantial amount of revenue was generated with that program. If you normalize for that, our revenue this year has been healthy.
EMI is actually very profitable overall. Our margins are the highest of any in the music business. We have a vision and an optimistic view of what our future looks like. Down the road, whoever buys us will believe in that future.
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