Sunday, February 27, 2011

Nokia tries to escape from a burning platform

By Emmanuel Legrand

Thanks to a leaked memo, we know more about what Nokia’s new CEO Stephen Elop thinks about the mobile phone company (in short, being there is akin to working on a burning oil platform over frozen seas), but we now little more about his global strategy, other than the much-publicised deal with Microsoft.

It is somehow easier to figure out what went wrong at the company that once was the pride of Finland. In "What sealed Nokia's fate?", The Register's Andrew Orlowski offers a fascinating view into Nokia’s failed strategy over the past few years. One of the faults listed by Orlowski was the over-dependence on R&D, with Nokia investing a lot in research but not delivering enough groundbreaking stuff to please the consumers.

As a result, the company that led the market lost its edge and other entrants delivered the goods. What it shows is that companies like Nokia that think too much about the future forget about inventing the present. And get by-passed by some smart ass (Steve Jobbs at Apple) who just does it! 

Saturday, February 26, 2011

Radiohead break new ground (again)

By Emmanuel Legrand

Radiohead are now getting better known for the way that they deliver their music to their fans than for the music itself.

Printed and online media were packed with stories about how the news of the new album was made public, just a few days before its digital release. What surprised most commentators was that a band the stature of Radiohead could announce the release of a new album just five days before its release, dispensing from the usual set up that surrounds the release of an album.

Stanley Donwood designed
the cover of Radiohead's new album 
As opposed to last time for 'In Rainbows', there were no free goods and no fluctuating pricing points this time. You had to go to a dedicated web site and pay a set sum (£6/$9/€7 for low-res files, £9/$14/€11 for high quality, and much much more for the physical product, due in May) for the privilege of downloading ‘The King Of Limbs’. No other site than theirs had the music (which must have pissed off iTunes and Amazon!). It is impossible at this stage to know how many people downloaded the album, but with the kind of fan base that the band have, it must be significant.

So what can be said about the whole process? First, that the band knows how to keep things secret. That they have been able to keep the whole thing quiet – from the recording to the release – in a world where the most trivial bit of news gets exposed is in itself an achievement. Then there is the whole digital distribution system that they have put in place, which gives them total control over the process, without middleman (and I suppose a very high share of the revenues that goes straight into their pockets).

Is it a model that can be replicated? Certainly by artists who have some sort of fan base and who do not care about “losing” on physical sales. Can it be the model of the future? It will most certainly be one of the models of the future, providing you have the infrastructure in place. Radiohead has great management and is supported by a publisher (Warner/Chappell) not afraid of going on with them on a journey into uncharted territories. It also certainly helps that they do not have the constraints of an existing label to deal with. They are the masters of their own fate, and very few artists have that privilege – although many could!

And what about the music? Those expecting a re-make of ‘OK Computer’ will be disappointed, and those who were hoping that the band would start exploring new areas will de disappointed too. The new recording is very much in the vein of ‘Kid A’/’Amnesiac’ or Tom Yorke’s solo album. A few will be irritated by the lack of obvious use of the band’s musicians, as there are no “real” guitar or bass sounds (in the sense that you cannot find any guitar solo or melodic bass line). And sometimes the “lack” of songs can be disconcerting. But for those who wish to pay attention, there is much to discover in the various layers of the sound (very tight production courtesy of Nigel Godrich) and in the deconstructed songs. It has to be listened to quite loud and with attention. In short, it is not their masterpiece, but it certainly is a good Radiohead album. Worth the £6 anyway.

Wednesday, February 2, 2011

Hands off EMI, Citi's in

by Emmanuel Legrand

So it's goodbye from Hands, and it's hello from Citi. And EMI once again changes hands.

No doubt that few will regret Guy Hands at EMI. His tenure at the major company started well, with great declarations of intent, but it then went from one PR disaster to another blunder and culminated with his legal case against Citi last year, which he lost. In the process, his track record, as well as his reputation as a businessman ended up in shambles.

Hands certainly overpaid for EMI in 2007 (especially if you compare to the price Edgar Bronfman paid for Warner Music Group). It was a vanity purchase, as the trial has shown.

But from the outset it did put the company under intense financial pressure to meet its covenants. In an eco-system that was shaken to the core by the digital revolution, the last EMI needed was this kind of pressure. It needed a clear direction and investors who were in there for the long run. Instead, it had no strategy, other than try to re-write the way record companies worked (which was a fine goal and a necessary undertaking, but they forgot that there were artists too...), and EMI was required to provide cash to pay its lenders (or Terra Firma's, to be more specific).

EMI needed to change but only a few measures taken by Hands made sense. Among them, letting its publishing division grow without interfering, and then appointing last year Roger Faxon as CEO of the group. But a lot of damage had been done, not least within the creative community. On the operational side, some of the new managers brought in by Hands were so busy proving that they were different from the old regime that they somewhat lost track of what mattered, which was to find, develop and market artists.

Instead, they created an internal structure (known as the matrix) that was straight out from some management consultancy textbook and designed by some lunatic Inspector Clouseau. One of Faxon's first symbolic measures when he took over was to dismantle the matrix.

So where does EMI go from now? At Midem last week, before the Citi deal was known, few were ready to bet a penny on the company's survival in its current state. When asked which part of EMI he would he be interested in, Vivendi CEO Jean-Bernard Levy joked by saying he would not want to pick EMI's debt. At least, thanks to the deal with Citi, a large chunk of the debt has been wiped out. That should give EMI some breathing space.

Then it will all come down to what Citi will want to do with the company. Banks are usually not in the business of owning and operating record companies. There are two possibilities for Citi: put the company up for sale immediately, and quickly pocket whatever they can milk from the market and wash their hands (sorry...) of EMI's future; or wait for a few years to give EMI some time to regain strength and then sell at a premium.

Newspapers are filled with reports that Warner and BMG Rights Management are interested in part or all of EMI's assets. One scenario would see Warner selling its music publishing arm Warner/Chappell to BMG Rights Management or Sony/ATV and acquire EMI with the cash it had generated from the sale. It would then merge its recorded music operations and have a significantly stronger record company and own a larger publishing company. This would significantly reshape the music biz map and create a true competitor to Universal and Sony Music.

One thing is certain, Hands has failed. That in the process he took down one of the world's largest music company is nothing to rejoice about (some around him may say that he saved EMI from bankruptcy, but it seems hard to make the case). He should now go back to where he came from, manage whatever millions he has left, and the people at EMI and the artists should get on with their jobs -- until they know what Citi will do with them next.