EMI seeks deal with rivals to distribute recordings

EMI seeks deal with rivals to distribute recordings

By Andrew Edgecliffe-Johnson in New York

Published: December 5 2008 02:00 | Last updated: December 5 2008 02:00

EMI is in talks with rivals over a US distribution deal that could bring in tens of millions of dollars for the indebted company - after earlier discussions about selling some of its labels stalled.

Universal Music, Sony BMG and Warner Music had each been approached by Terra Firma, which bought EMI for £4bn ($5.9bn) in 2007, several people familiar with the talks said.

Rivals value the contract to take over EMI's warehouses and distribution network at $20m to $30m although Guy Hands' private equity group has pushed for a higher price.

Terra Firma initially discussed getting out of the distribution of compact discs and digital music in the US altogether, according to several people familiar with the negotiations. Talks now focus on physical distribution only, excluding sales and marketing.

Universal, Sony BMG and Warner each outsource parts of the physical distribution chain to third-party specialists such as Entertainment Distribution, Sony DADX and Cinram.

By negotiating with rival music companies rather than third parties, EMI is more likely to secure an upfront payment, people familiar with the talks said, as its rivals could find savings from consolidating its distribution with that of EMI. "Terra Firma is looking for a cheque," one said.

One issue discussed has been the potential competition issue of allowing a rival access to details of EMI's wholesale pricing.

The talks were led by Chris Roling, one of the Terra Firma executives now leaving EMI as their chances of large bonuses or rapid returns on their personal investments decline.

The discussions over the recorded music business do not affect the more profitable music publishing division, which owns the rights to songs from Amy Winehouse and Simply Red.


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