Capital Scarce For Major Labels; EMI Looks To Cut Funds to Industry Groups

Planned debt offerings from EMI and Warner Music Group (NYSE: WMG) will have to wait. FT reports that the companies had been looking to raise cash in order to pay investors, refinance debt and fund operations, but a combination of macro conditions and industry-specific difficulties makes it very unlikely. It’s not clear to what extent EMI’s stated plans to aggressively ramp its digital business is contingent on it raising more capital, but something will have to give. Tomorrow’s earnings report from WMG should provide greater visibility into its capital condition.

EMI Weighing Trade Group Cuts: Meanwhile, the cuts at EMI, recently acquired by PE firm Terra Firma, continue. The latest potential target: annual payments to industry trade groups, according to Reuters, citing sources familiar with the situation. Groups like the RIAA and IFPI (International Federation of the Phonographic Industry), which receive funds from major and independent record labels, have been actively prosecuting a longstanding fight against music piracy. Since it’s not clear that the labels are getting much (if any) bang for their piracy-fighting buck, it’s not surprising that EMI’s new owners see this as an area to cut back — besides, as long as the other labels continue to fully fund these groups, EMI can always free ride. The IFPI estimates that the major labels spend £64 million ($133 million) annually across the various trade groups.

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