HITS Daily Double
If Hands passes on writing the $189 million check, the big question then becomes, what will the new owner choose to do with the music group?


This Week, Hard Times (and Rising Share) for EMI, Hot Times for Sony and Interscope, the Sweet Spot for CDs and the End of the Line for Old-School Record Deals
Guy Hands has until late May to come with the $189 million payment to Citigroup or default on the loan and lose EMI. Will he or won’t he write the check, and how much skin does Citi have in the game, considering the lender already wrote off a sizable position of its $2.6 billion loan to Terra Firma during the Obama bailout? If Hands passes, the big question then becomes, what will the new owner choose to do with the music group? Citi Chairman Richard Parsons has a knowledge of the music business from his years at Time Warner. How will his selling of WMG to Edgar Bronfman in 2004 factor into his decision regarding EMI? Might Parsons actually find a reason for Citi to retain ownership of the company? While this is an intriguing scenario, most believe Citi will separately sell off EMI Music Publishing, which could fetch as much as the debt the lender is now holding on the company as a whole. If so, the most logical buyers for the record company would be the other three majors because of the sizable cost savings the acquisition would bring. Warner Music is the smallest of the three companies and has shown the most eagerness, but UMG and Sony Music shouldn’t be ruled out as prospective buyers. Another scenario would have a U.K. consortium forming in order to keep EMI, with its distinguished history, under British ownership… Amid this corporate intrigue, EMI has heated up, gaining nearly three percentage points since the beginning of the year, and now sitting at 12.8% in new-release marketshare—edging ahead of WMG. Much of the credit for the surge goes to Mike Dungan’s Capitol Nashville, now up to 5.8% behind Lady Antebellum, which has performed beyond expectations, passing the 1 million mark this week… Two months into 2010, the rainmakers who led the pack during the holidays, Dungan included, are still racking up the big numbers. Leading the way is Rob Stringer’s Sony Music Entertainment, with 10.6%, paced by Steve Barnett’s Columbia (6.2%), as Susan Boyle continues to set the pace (463k year-to-date, good for #4), while Sade (687k in two weeks, putting her at #2) has put up a surprising and resounding W for Epic, beating expectations just as Lady A has done. Barry WeissRCA/Jive (8.6%) has also posted solid numbers behind rookie Ke$ha (375k, #5), making the label group #3 in new-release marketshare. Sandwiched between the two Sony Music powers is Jimmy Iovine’s IGA (9.1%), thanks primarily to the singles-spewing tandem of Lady Gaga (with 478k on #3 The Fame and another 232k on the eight-song The Fame Monster) and Black Eyed Peas (347k, #7)… Discussions are continuing regarding the future of Sony Music Chairman Rolf Schmidt-Holtz, whose deal expires at the end of the year, but they’re taking place behind closed doors. The lack of news has industry observers continuing to ask, if not Rolf, then who?… Jennifer Lopez’s exit from her Sony deal is another example of a major not wanting to go forward with an expensive contract dating back to the last century. J.Lo is among a sizable group of onetime big-selling acts who no longer move the needle as they did during the good old days… There’s an interesting story behind the story of Paul McCartney’s upcoming Hollywood Bowl dates. Barry Marshall, who’s been handling McCartney’s tours for two decades, made the deal with the Bowl despite the fact that his company is 50% owned by AEG. Why, then, did Marshall bypass Randy Phillips and Staples Center? The answer, according to insiders, revolves around Phillips reneging on a tour involving another Marshall client. Macca joins a growing list of acts including Lady Gaga, James Taylor/Carole King and Justin Timberlake, all of whom have chosen not to work with Phillips… The CD has shown signs of life since Trans World began an experiment six months ago by dropping the price on all physical product in some of its stores to $10. The result: one major distributor has seen an uplift of more than 100% in those outlets. This eye-catching result has given added cache to the theory that it’s possible to reinvigorate consumers by locating the “sweet spot” price point. Retail mavens believe that if any or all of the Big Four distributors react to these results by lowering the wholesale price of CDs, they’ll be forced to compensate for the resulting razor-thin margins. Specifically, they expect to see the current trend of albums containing fewer tracks to intensify… Names in the Rumor Mill: Roger Ames, Amanda Ghost, Troy Carter, Peter LoFrumento, Gary Stiffelman, Benny “The Jet” Medina, Johnny Barbis and Sonny Takhar.