The Wall Street Journal-20080114-The Morning Brief- EMI Focuses on Oldies For More Profitability- Online edition
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The Morning Brief: EMI Focuses on Oldies For More Profitability; Online edition
The Wall Street Journal Online
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As the technology and media worlds brace for whatever grand plans Apple may unveil at the annual Macworld Conference & Expo, the more revolutionary media change this year may be coming from recording giant EMI -- and its new private-equity owner's views on artistic risk and the bottom line.
EMI tomorrow plans to announce a restructuring that could cut up to 2,000 jobs and emphasize the profitability of its catalogue -- with the likes of the Beatles, the Rolling Stones and Norah Jones -- rather than its recorded-music division, the Times of London reports. Guy Hands, head of Terra Firma Capital Partners, which acquired embattled EMI last year, is expected to stress how half of the company's profits come from the catalogue division, which employs 1,100 people, compared with the 4,500 who deal with newly recorded music, the Times says. Mr. Hands wants to centralize sales, marketing and other support functions and also scrap EMI's current bonus regime for managers -- which is based on album shipments -- and replace it with one based on group profits, the paper adds.
Mr. Hands's strategy to make Terra Firma's $6.26 billion investment pay off comes "as the music industry as a whole has struggled to return to profitability -- and indeed to prove itself viable in the long term," The Wall Street Journal notes. Recorded-music sales -- including online album sales -- were down 15% last year, with paid music downloading growing too slowly to make up for the decline in sales of compact discs, the Journal adds.
And yet, while most of EMI's rivals scrounge for new sources of revenue from licensing and other sources, and as they strive to find the new hot sounds and the best way to market them in the age of Facebook and YouTube, Mr. Hands may be favoring a post-Yuppie reliance on hits of the past -- a category of music that perennially sells, and often to a clientele whose purchasing habits may be more static and reliable. His approach has already been slammed by the likes of Paul McCartney -- who called it "really very boring" -- and Tim Clark, the manager of Robbie Williams, who accused Mr. Hands of behaving like a "plantation owner," the Times notes. But caution and comfort may prove to be better themes than zeitgeist for the newest generation of recording-company owners.
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In Mideast, Money and Politics, or Vice Versa
No region has enjoyed more political and economic attention in the past few days than the Middle East, which while hardly a new phenomenon, is striking because of how much the economic has overshadowed the political in ways that aren't explicitly about oil. President Bush is in Dubai this morning, his second stop in the United Arab Emirates, and heads on to Saudi Arabia later -- a day after French President Nicolas Sarkozy arrived in the kingdom on his own Persian Gulf tour. Mr. Sarkozy last night spoke of reestablishing the basis of Franco-Saudi relations, but he didn't mean France was going to play a more prominent policy role. When Mr. Sarkozy said France had to do better in the region, he was referring to his country's seventh- place role among Saudi trading partners, behind the U.S., China, Japan and fellow Europeans, as Le Monde notes.
Mr. Bush's focus is more ostensibly political. Yesterday, in Abu Dhabi, he struck his administration's latest urgent note on the Iran issue, calling on Persian Gulf allies to rally against Tehran's nuclear program "before it is too late." The timing of his remarks -- with an ambiguous U.S. National Intelligence Estimate on Iranian nuclear ambitions from December still fresh in Middle East minds -- wasn't helped by yesterday's announcement from the International Atomic Energy Agency that Iran once again was ready to openly address the IAEA's suspicions. Still, as the New York Times notes, that announcement "essentially delayed for another month what had been an end-of-the-year deadline to disclose all of its nuclear work, including any covert or undeclared military research." And it was just the latest of repeated Iranian promises to answer questions that still haven't been answered. Mr. Bush, while in Abu Dhabi, also offered what The Wall Street Journal describes as a "cautious critique of political repression in the Middle East, reassuring nervous Arab leaders of continuing U.S. support while calling political and social change inevitable."
And yet the fresher news and more eye-catching headlines out of the region seem to be about the money flowing from its petro-fed coffers to the troubled banks in the U.S. Following the Journal's report over the weekend that Citigroup is again seeking investment help from Saudi billionaire Prince Alwaleed bin Talal -- as well as from the state- owned China Development Bank -- the Financial Times reports that Merrill Lynch is trying to raise $4 billion to shore up its balance sheet from the Kuwait Investment Authority, among others. And the FT notes that "KIA, which may also invest as much as $2 billion or $3 billion in Citigroup, is emerging as a large source of rescue finance on Wall Street," though it was "once among the most conservative of sovereign wealth funds.
When Mr. Bush reaches Saudi Arabia today, and before he winds up his trip to the region midweek in Egypt, his public agenda is likely to focus on Iran, Iraq and a campaign to build more support among the Saudis and other Arab nations for the recent and fragile resumption of Israeli-Palestinian talks. But global finance is more than likely to figure in his Riyadh stop too. On top of Saudi investment in the U.S., the country's largest state-owned bank is now urging the government to revisit the riyal's peg to the U.S. dollar -- which would make it just the latest Persian Gulf state seeking more diversification in its reserves. While the Saudi central bank has ruled out such reevaluations in the past, with the dollar still on the wane, that urging from National Commercial Bank chief economist Said Alshaikh "comes amid intense pressure on the government to tackle rising inflation," the FT notes.
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More Trouble for Mortgage Lenders
Back in the U.S., and in the U.K., the mortgage meltdown at the heart of the big banks' crises continues to reverberate. Citing court documents, The Wall Street Journal reports that a growing number of federal bankruptcy judges are "calling into question the business practices" of troubled mortgage lender Countrywide Financial, even as Bank of America is preparing to buy the company. "Countrywide didn't properly credit a borrower's payments made during bankruptcy but instead applied them to prebankruptcy debt, which isn't allowed," amid other alleged misconduct, the Journal says. And the British government seems to be finalizing contingency plans to nationalize that country's most conspicuously troubled mortgage lender, Northern Rock, "after it appeared rebel shareholders in the stricken bank were close to wrecking ministers' hopes of a competitive private sale," the Guardian reports. To that end, the government has lined up a new chief for Northern Rock, Ron Sandler, a former head of the insurance market at Lloyds of London and former adviser to Prime Minister Gordon Brown.
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McCain Leads Nationally, Economy Leads in Michigan
Following the political tumult in Iowa and New Hampshire, the latest national polls -- for what they're worth -- show Hillary Clinton still leading Barack Obama among Democrats, but that the latter is increasingly viewed as electable. On the Republican side, according to the latest New York Times/CBS News and Washington Post-ABC polls, John McCain has emerged as the frontrunner. Thirty-three percent of Republican primary voters told the Times poll that Mr. McCain was their choice, up from 7% just a month ago, while Mike Huckabee got 18%, Rudy Giuliani 10% -- down from 22% last month. Mitt Romney got just single-digit support. In the Post poll, it was Mr. McCain doubling his support from last month with 28% among likely Republican voters, Mr. Huckabee getting 20%, Mr. Romney 19% and Mr. Giuliani 15%. But those national numbers could change again before nationwide sentiment could really count on the Feb. 5 super-primary day, vulnerable as they'll probably be to the votes that come first.
Messrs. McCain, Romney and Huckabee are in what amounts to a three- way race for Michigan. And while the first two are leading in the polls there, hard times in the state have "forced their attention to voters' economic anxieties -- an issue sure to loom large in the general-election battle against the Democrats' nominee," The Wall Street Journal reports. Messrs. McCain and Romney are now sounding a note of economic populism akin to themes long touted by Mr. Huckabee. Another consequence, pointed out by the Detroit News, is how much that has focused the Republican race on the car industry, just as the North American International Auto show is getting underway in Motor City.
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Also of Note . . .
Washington Post: Climatic changes appear to be destabilizing vast ice sheets of western Antarctica that had previously seemed relatively protected from global warming, researchers reported yesterday, raising the prospect of faster sea-level rise than current estimates. Antarctica holds about 90% of Earth's ice, and researchers found that the rate of ice loss in the affected areas has accelerated over the past 10 years -- as it has on most glaciers and ice sheets around the world.
Wall Street Journal: A long-running dispute over one of the world's biggest oil-development projects was finally resolved last night with an agreement to let the Kazakhstan state oil and gas company double its stake in the multibillion-dollar venture, but the amount KazMunaiGaz will pay for its increased share shows how little leverage Western companies have these days when faced with oil-rich countries emboldened by soaring crude prices and determined to regain control of their natural resources. Under the agreement, KMG's stake in the consortium will rise to 16.6%, at the expense of all the other partners: Eni, Exxon Mobil, Total, and Royal Dutch Shell, as well as ConocoPhillips and Inpex Holdings Japan.
Dow Jones Newswires: Gold analysts are predicting a perfect storm of factors will mean the precious metal's move above $900 a troy ounce today is just the first big figure likely to be reached this year. After several days of flirting spot gold has finally broken through the psychological $900-per-ounce level to reach $912.90 in morning European trading.
Nikkei: At a time when demand is pushing wheat prices skyward, the Japanese Agriculture Ministry is discussing with domestic flour- milling companies the possibility of raising government-set prices of imported wheat by around 30% starting in April. Japan relies on exports for 90% of wheat consumed domestically, and the government handles nearly all wheat imports and sells them to flour millers after adding on costs for subsidies paid to domestic wheat farmers.
Government Executive: The U.S. Office of Management and Budget has released a memorandum laying out new policies to curb federal employees' abuse of premium travel that were revealed in a September report from the Government Accountability Office, which said that 67% of first- and business-class travel by federal employees was not properly authorized or justified.
International Herald Tribune: A vast flotilla of industrial trawlers from the European Union, China, Russia and elsewhere, together with an abundance of local boats, have so thoroughly scoured northwest Africa's ocean floor that major fish populations are collapsing. That has crippled coastal economies and added to the surge of illegal migrants who brave the high seas in wooden pirogues hoping to reach Europe.
Reuters: Apple Inc and China Mobile have called off talks to launch the U.S. firm's popular iPhones in China, a spokeswoman for the Chinese company said today, further dashing speculation the device will hit the country's store shelves soon.
New York Times: Zagat Survey, the guide empire that started as a hobby for Tim and Nina Zagat in 1979 as a two-page typed list of New York restaurants compiled from reviews from friends, has been put up for sale, according to people briefed on the decision. The Zagat family has hired Goldman Sachs to seek a buyer for the company, which since its founding almost three decades ago has become part of the global culture: the company sold 5.5 million guides last year in more than 100 countries and has a Web site with 1.5 million registered users.
Variety: Two films that twist their genres, the period romance "Atonement" and Tim Burton's adaptation of the murderous musical "Sweeney Todd," were named the top movies of 2007 at the odd and quickly executed 65th annual Golden Globes "ceremony." Because the Hollywood Foreign Press Assn. was unable to make a deal with the striking Writers Guild of America, which would have allowed the Globes to be televised, the usual fanfare associated with the Globes was replaced by a news conference, with award winners read by television entertainment journalists from the shows "The Insider," CNN's "Showbiz Tonight," E!, "Extra," "Inside Edition" and "Entertainment Tonight."
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Quote of the Day
"Western-style democratic theory simply isn't suited to African conditions, but rather carries with it the root of disaster," the People's Daily newspaper, the official mouthpiece of China's ruling Communist Party, said in a commentary today that blamed Kenya's post- election violence on European countries' decisions to "tyrannically" impose Western democratic systems when their colonies achieved independence.
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