Angels by Robbie Williams took the second place, while You're Beautiful by James Blunt took the third position.

 

3 Angels, Robbie Williams

 

4 You're Beautiful, James Blunt

 

Morons can't even write a story properly :rofl:

I'm glad I'm not the only one to notice that Ossy! Thought for a second I was hallucinating again... :huh:

Guy Hands May Get No Satisfaction as Web Pirates Let EMI Bleed

 

By Richard Tomlinson and Edward Evans

 

July 30 (Bloomberg) -- Guy Hands, the British dealmaker who made his name securitizing pubs and passenger trains, has assembled investors on a sunny June afternoon in London for the annual review of the companies held by his buyout firm, Terra Firma Capital Partners Ltd.

 

High on the list: EMI Group Ltd., the record company he bought in August 2007 with 1.47 billion pounds ($2.93 billion) cash, more than he's invested in any previous takeover, and 2.5 billion pounds of loans.

 

EMI -- a 111-year-old company whose acts have ranged from the Rolling Stones to Radiohead and from Iron Maiden to Coldplay -- has been struggling with declining sales since 2001. EMI's net loss in the 12 months ended in March 2007 totaled 288.5 million pounds.

 

While Hands has spent the past year firing employees, looking to weed out unprofitable performers and bringing in digitally aware executives, he has stepped into a company that has defied previous attempts to lift it out of its misery.

 

``EMI will be defining for Guy,'' Robert Womsley, a partner in London at Citigroup Inc.'s alternative investments unit, says in an interview. ``If he gets it right, it's another deal where he saw the opportunity others didn't,'' says Womsley, whose firm has money in more than 300 private equity funds, including Terra Firma. ``If he gets it wrong, everyone will say, `I told you so.'''

 

At Abbey Road

 

It's against this background that more than 50 Terra Firma investors have gathered at EMI's Abbey Road studios, where the Beatles made their final recordings together. Some pause for snapshots of each other on the zebra crossing pictured on the cover of the Beatles' 1969 Abbey Road album, then head inside for lunch and the yearly review of Terra Firma's investments.

 

Hands, 48, exudes confidence. As part of his presentation, he shows investors a 35-minute video justifying the EMI acquisition, according to people who were present at the closed-door meeting.

 

EMI's collection of recorded music, which goes back to the late 19th century, and its music publishing business will bring in revenue while he restores the rest of the company to profit, Hands tells investors, according to prepared remarks obtained by Bloomberg News.

 

The company, which owns the copyright to more than 1 million titles, receives royalties anytime songs such as ``Singin' in the Rain'' and ``Strangers in the Night'' are played anywhere in the world. Its catalog of recorded music -- more than 3 million tracks, including the Beach Boys' ``God Only Knows'' and Pink Floyd's ``Another Brick in the Wall'' -- continues to generate sales.

 

`First Class'

 

``Those two businesses are absolutely first-class,'' Hands says in an interview. The challenge is to overhaul the unit responsible for finding and hiring new talent and releasing their albums, because too many EMI artists never earn back their advances, he says at Terra Firma's offices overlooking London's Tower Bridge. ``It's one of the toughest restructurings you can do.''

 

The first signs are encouraging, Hands said in a July 14 e- mail to EMI staff. EMI's recorded music unit swung into a profit in the three months ended on June 30 as it cut jobs and stemmed excess deliveries of CDs to retailers.

 

The unit posted earnings before interest, tax, depreciation and amortization of 59.2 million pounds, compared with a loss of 45.1 million pounds a year earlier. Hands told EMI staff that future quarters may not be as profitable.

 

If Hands can turn around EMI, he'll be able to at least double his cash investment over the next four to six years, he says in the interview.

 

``It is a business under enormous challenge worldwide, not just for EMI but for the whole music industry,'' he says. The new- music unit employed 4,800 of EMI's 5,400 employees when Hands took over, he says. About 2,000 of those jobs are being cut.

 

No Quick Exit

 

Adding to the pressure, there will be no quick exit from the EMI investment for Terra Firma because the credit crunch makes buyers of private equity assets scarce. Hands says he won't sell EMI or any of Terra Firma's other assets until 2012 at the earliest.

 

Refinancings -- in which a company takes out new loans to pay its buyout firm owner a dividend -- also have stopped. Not one private-equity-owned business in Europe got a loan to finance a dividend to its owners in the first half of 2008, according to credit rating company Fitch Ratings Ltd. That compared with 19 in the first half of 2007.

 

New buyouts have also plunged. Firms led $147 billion of takeovers worldwide in the first half of the year, less than a third of the $527 billion of deals they announced in the same period last year, according to data compiled by Bloomberg.

 

Large Deals Gone

 

``The large deals have pretty well gone for the foreseeable future,'' Hands says. ``Most banks that were prepared to lend single-handedly up to $5 billion last year are now at a limit of $500 million.''

 

Banks that lent money to Terra Firma and other private equity firms for deals in Europe were lumbered with as much as 80 billion euros ($125 billion) of bonds after the credit crunch, according to Fitch.

 

Hands expressed disdain for their plight last November at a conference for private equity dealmakers in Paris.

 

``Bankers are like dogs,'' he said. ``They hunt in a pack and go into a feeding frenzy. When hit, they whimper and hide in their baskets.''

 

Citigroup, which lent Terra Firma 2.5 billion pounds for the EMI deal, hasn't been able to get the debt off of its books, according to Hands. Citigroup declined to comment.

 

In April, the bank decided against including the EMI debt in a $12 billion package of buyout loans it sold to U.S. private equity firms Apollo Management LP, Blackstone Group LP and TPG Inc. amid investor concern about EMI's turnaround, according to a person familiar with the discussions.

 

Meridien Flop

 

Hands has had one big flop. In 2003, he wrote off a 318 million euro investment in Le Meridien hotels as business travel slumped following the Sept. 11, 2001, terrorist attacks in New York and Washington.

 

Overall, he has made big profits for investors since 2002, when he left Nomura Holdings Inc., where he had overseen the Japanese bank's Principal Finance Group, to start his own firm. His 2.1 billion euro leveraged buyout fund, his first that used money from outside investors, generated a cumulative 53 percent gross internal rate of return from February 2004, when the fund closed, to June 30, 2007, according to a report to limited partners obtained by Bloomberg News.

 

Sgt. Pepper

 

Hands raised 5.4 billion euros for his latest fund, and invested almost 30 percent of it in EMI. Merrill Lynch & Co., which advised Terra Firma on the fundraising, gave Hands a mock-up of the Beatles' ``Sgt. Pepper's Lonely Hearts Club Band'' album sleeve to commemorate the closing of the fund in May 2007.

 

The mock-up, which hangs on a wall at Terra Firma's head office, superimposes Hands's head on the uniformed figure of George Harrison and substitutes the name Terra Firma for Beatles in the floral display in front of the band.

 

Hands, who has a karaoke machine in his home, was listening on his iPod music player over the summer to Amy Winehouse, the British rhythm-and-blues singer who won five Grammy Awards earlier this year, including record of the year for ``Rehab,'' about her previous defiance over treatment for addiction; ``Long Road Out of Eden'' by the Eagles, the Southern California rock band; English pop star Lily Allen; and Pink Floyd, whose 1973 album ``Dark Side of the Moon'' remained on Billboard magazine's Top 200 album chart until 1988, according to the British group's biography on the Rock and Roll Hall of Fame Web site.

 

At his office on a late May morning, Hands walks through rows of desks arranged like a trading floor, stopping to check his day's schedule with one of his three secretaries.

 

Rarely Uses Computer

 

Hands is dyslexic and doesn't use a BlackBerry, preferring to dictate nearly all of his correspondence. He rarely uses a computer. Only four of the firm's 75 London dealmakers are at their desks -- the others are out on the road managing Terra Firma's investments.

 

He says he tells all the managers at the companies he buys the same thing: ``We're either going to be a pain in the ass or we're going to be your best mate, and it's going to depend on the chemistry between us.''

 

Hands has replaced the chief executive officer and other senior managers at 23 of the 25 companies he's acquired -- including EMI, where the group's executive chairman, Eric Nicoli, who was also head of the recorded music division, left in September 2007.

 

Hands, who named himself executive chairman, spends two days a week at EMI headquarters in London's Kensington district. On July 7, Hands appointed Elio Leoni-Sceti CEO of EMI's recorded music unit. Leoni-Sceti, 42, formerly executive vice president for Europe at Slough, England-based Reckitt Benckiser Group Plc, maker of Dettol disinfectant and Harpic lavatory cleaner, will start at EMI in October.

 

Landfills, Energy

 

Once Hands and his team take over, they try to find new ways of using the company's existing assets to make money. In 2003, Hands acquired Waste Recycling Group, an owner of U.K. landfills, and a year later merged it with a rival.

 

Anticipating increased demand for alternative forms of energy, Hands expanded the company's unit that generates electricity by using methane emitted by rotting waste. In 2006, he sold the company's landfill sites for 1.4 billion pounds, keeping the right to use them to generate electricity. That waste-to-energy business, dubbed Infinis Ltd., had operating profit last year of 50 million pounds, up 14 percent from a year earlier.

 

History of Takeover Bids

 

When Hands made his offer for EMI in May 2007, the music company had been in play for more than a year. In March 2007, EMI had rejected a bid of 260 pence a share from rival Warner Music Group Corp.

 

On May 21, Hands offered 265 pence, while EMI stock was trading at 248 pence. Shares then jumped above 270 pence as investors anticipated a counterbid from Warner that never materialized. It took Hands until August 2007 to acquire all of the shares and close the deal.

 

EMI's stock would likely trade today at less than a quarter of Hands's bid price if EMI were still a public company, says Claire Enders, CEO of Enders Analysis Ltd., a London-based music and entertainment industry research firm. She worked at EMI from 1992 to '97.

 

``He may say, of course, `I'm going to double my money,' but he can't really explain how he's going to do it,'' she says.

 

The company Hands acquired had a checkered history. EMI traces its roots back to 1887, when German-American inventor Emile Berliner -- who created the microphone for Alexander Graham Bell -- developed the gramophone method of recording sound using discs.

 

Gramophone, Thorn

 

A company founded by Berliner, London-based Gramophone Co., was merged in 1931 to form Electric & Musical Industries Ltd., or EMI. In 1979, Thorn Electrical Industries Ltd., a U.K. domestic appliance maker, bought EMI and renamed the company Thorn EMI Plc. In 1996, Thorn and EMI split into separate companies, both traded on the London Stock Exchange.

 

Chris Roling, a Terra Firma managing director, was named by Hands as EMI's chief operating officer. Hands also installed two replica fiberglass electric guitars he bought in an auction of rock music memorabilia in the main lobby of the company's headquarters.

 

The first task has been to cut costs, says Roling, who was previously vice president for finance, procurement and logistics at Imperial Chemical Industries Plc's paints and packaging division in Slough, England.

 

By the end of June 2008, EMI had shed about 1,500 employees and saved almost 100 million pounds in annual costs, Roling says. He has also consolidated the staffs of EMI's main U.S. and U.K. record labels, each of which previously had its own finance and human resource teams.

 

No More Chauffeurs

 

Roling, 47, dressed in a white shirt with button-down collar and a blue tie, has also pared back traditional music-industry perks.

 

``We did away with the chauffeurs,'' says Roling, whose desktop at EMI contains a computer and little else.

 

The biggest hurdle for Hands is trying to make money out of selling recorded music. So-called file-sharing Web sites allow users to download songs without paying for them.

 

``Teenagers understood the potential of the Internet far earlier than middle-aged record company executives,'' says Simon Garfield, author of ``Expensive Habits: The Dark Side of the Music Industry'' (Faber & Faber, 1985), a book about the business of rock. ``EMI, like its competitors, didn't realize until too late how significant the impact of digital downloading was going to be.''

 

Worldwide sales of CDs and DVDs have dropped by more than a third in the past decade to $15.9 billion in 2007, according to the International Federation of Phonographic Industries, the music industry's trade association.

 

Internet Downloads

 

Fewer than a third of U.S. teenagers say they pay to download music from the Internet, according to a 2007 survey by Ipsos SA, a Paris-based market research firm.

 

At EMI, operating profit from recorded music sales fell by two- thirds to 45 million pounds in the year ended in March 2007. All of that profit came from EMI's back catalog of recorded music, Hands says.

 

These recordings range from ``Songs for Swingin' Lovers,'' released by Frank Sinatra in 1955, through ``Deep Purple in Rock,'' the best-selling 1970 album by the U.K. heavy metal band Deep Purple, to ``Hello Nasty,'' the 1998 CD by New York hip-hop band Beastie Boys.

 

``The hair on the deal was the new music, which at EMI employs 80-90 percent of the people,'' says Hands, talking about Terra Firma's buyout of EMI.

 

Hands says he can end undisclosed losses from EMI's current roster of recording artists by dropping musicians who don't make a profit for the company, and paying smaller advances or even salaries to those he keeps.

 

100 Years of Recordings

 

He also wants to issue more CDs from EMI's catalog of 3 million recordings made during the past 100 years. A year after Terra Firma bought EMI, only a fraction of those recordings have been converted to the digital format, Hands says. EMI doesn't break out profit figures for CDs in the back catalog from those of new albums.

 

Hands says he was surprised to find that EMI devoted less than 1 percent of its marketing budget to advertising new releases on the Internet, spending a big chunk instead on radio advertising.

 

``Yet the major people who buy music are totally digitally based, and our surveys show they hardly listen to the radio,'' he says.

 

Roling is combing through EMI's roster of 14,000 artists with an eye on the bottom line. Only a minority of EMI's performers make profits for the company, Hands says.

 

Coldplay Album

 

EMI's current best-selling artists include U.K. rock band Coldplay -- whose lead singer, Chris Martin, is married to U.S. actress Gwyneth Paltrow -- and U.S. singer Katy Perry, whose album ``One of the Boys'' made Billboard's Top 10 when it was released in June.

 

``If you have a major act on your books which is not providing a return to our investors, one would question the value of having that act,'' Roling says. He declines to name any who've been dropped.

 

Some artists may leave of their own accord. English singer Robbie Williams, an EMI artist and former member of U.K. teenage pop group Take That, won't deliver on the last part of his 80 million pound, four-album deal with EMI until he's satisfied that, following its job cuts, EMI will still have enough sales and marketing executives to promote the disc properly, according to his management company.

 

``This is a totally reasonable position to take by the manager of an artist of Robbie Williams's stature,'' says Andy Saunders, a spokesman for Williams's London-based management company IE Music Ltd. Williams has sold more than 50 million albums as a solo artist since 1995.

 

 

Roling keeps a publicity picture of Williams wearing a white naval uniform on the wall behind his desk at EMI.

 

``He reminds me of the 80 million pounds we spent, and the job I have to do to try to recoup it,'' Roling says.

 

 

The Rolling Stones, whose world tour in 2005-07 grossed $558 million, making it the most lucrative of all time, have departed after 16 years as EMI artists. Their EMI contract expired in April with no new deal. Neither side would disclose how much the band made for EMI or the terms of the agreement. EMI didn't own the rights to the band's songs.

 

``We put forward the best bid we possibly could at a level where we could at best break even,'' says Hands, who didn't participate directly in negotiations with the band. ``We believe people will pay a lot for the advertising value of having the Rolling Stones. Frankly, we have to run the business for profit, not for status.''

 

`Hands-On Management'

 

On July 25 Vivendi SA's Universal Music Group, the world's largest music company, said it had signed an agreement with the band. ``Universal are forward thinking, creative and hands-on music people,'' the Rolling Stones said in a statement issued by the company. Universal, based in Santa Monica, California, didn't disclose terms. Bernard Doherty, a spokesman for the band in London, declined to comment on the deal.

 

Some artists are sticking by EMI. Iron Maiden, the U.K. heavy metal band that's sold 70 million albums since joining EMI in 1979, renewed its contract in December 2007. Amanda Conroy, a spokeswoman for EMI, declined to comment on the terms of the contract.

 

Hands says he was taken aback when he first met EMI's former management team.

 

``I expected to find a young, multicultural, new media, digitally connected, creative group,'' says Hands, who lives in Sevenoaks, Kent, just outside London, with his wife Julia and four children in a mock-Tudor mansion that was formerly a convalescent home for wounded soldiers. ``Instead, I found London white males, over 55 and dressed in black.''

 

He hired Nick Gatfield, formerly the president of Universal Island Records Group, a unit of Universal. Gatfield, 47, in April became president of EMI's North American and U.K. record labels, which include Capitol, Parlophone and Virgin.

 

Ex-Google Manager

 

In April, Hands also hired Douglas Merrill from Google Inc. to head EMI's digital music unit. Merrill, 38, who was the Mountain View, California-based company's chief information officer, says so far he hasn't identified any single way to make customers pay to download music.

 

``We don't know the answer, and that's kind of exciting,'' he says in a telephone interview from EMI's Los Angeles office, where he's based. ``When you don't know the answer, you try a bunch of things, and in careful ways you measure the result. We'll figure out how to make money later.''

 

Radiohead's Example

 

Merrill and Hands both say EMI should follow the example set by British band Radiohead, which in October 2007 released an album, ``In Rainbows,'' solely on the Internet. Radiohead, which left EMI in 2003, allowed its fans to download any of the tracks for free for a two-month period, with the option of deciding how much they wanted to pay. Hands, who's a fan of Radiohead, has ``In Rainbows'' loaded on his iPod.

 

Bryce Edge of Abingdon, England-based Courtyard Music Ltd., which manages Radiohead, says the project would have been difficult had the band still been with EMI.

 

``We couldn't have kept it secret ahead of the release, because too many people would have been in the loop,'' he says. Courtyard wouldn't disclose how much Radiohead fans paid for In Rainbows tracks.

 

EMI made one track from Coldplay's latest album, Viva la Vida, available for free download for a week in April, two months before its June release. In June, the album was No. 1 on both sides of the Atlantic, selling more than 600,000 copies in the U.K. and more than 720,000 copies in the U.S.

 

Legal Downloads

 

EMI has also negotiated contracts with legal music-sharing Web sites, which pay record companies royalties while allowing fans to download tracks for free.

 

For example, New York-based SpiralFrog Inc. operates a site that offers more than 1 million songs for free to users in the U.S. and Canada. It sells advertising space to finance the service. In June 2008, EMI signed a digital distribution agreement with SpiralFrog.

 

EMI's back catalog, most of which is bought by middle-aged customers, is less vulnerable to free downloads than new CD releases, says Enders, the former EMI executive.

 

``Most older folk don't pirate music,'' Enders says.

 

Only 17 percent of U.S. music buyers aged 35 to 54 say they have ever copied a CD rather than purchase it. In the 12-24 age group, the number is more than twice as high, according to Ipsos.

 

Keeping even older customers paying for music isn't guaranteed as downloading tracks becomes easier.

 

``I believe a lot of our experiments will fail -- but some won't,'' Merrill says.

 

Hands says he's sure the once-great music company can make a comeback.

 

``It still looks on paper like an extraordinary deal if you can do the turnaround on new music and an OK deal if you simply end up with publishing and catalog succeeding,'' he says.

 

If Hands doesn't make good on his promise, Terra Firma's investors may be singing a different tune.

 

To contact the reporters on this story: Richard Tomlinson in London at rtomlinson1@bloomberg.net and Edward Evans in London at Eevans3@bloomberg.net.

 

Last Updated: July 29, 2008 19:03 EDT

 

Maybe Roling is upset over the fact that Robbie got the better end of the deal...the fans want Robbie but they do not need EMI....( EMI would do well to remember that )....... <_<