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Wanna Bet Blaise

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by Russ Mitchell
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Jun 19 2008 12:00am EDT

Wanna bet, Blaise?

Russ Mitchell begs to differ: with his esteemed colleague Blaise Zerega, who in this column yesterday blasted the private equity bunch behind music label EMI. Blaise, like many business writers and editors, seems to hold one of two views on music industry leaders: If they don't change, they're dinosaurs. If they do change, they're lining their pockets while destroying a storied business beloved by many. In other words, they can't win.

The EMI story is far more nuanced than that. Blaise is right when he suggests that most of the value for private equity investors will come out of the publishing side of the business. But it's those very profits that will allow EMI to experiment with new ways of creating new music.
Late last year, EMI hired Google chief information officer Douglas Merrill to run its digital music business, setting him up in LA, far distant from the old-line stiffs at corporate in London. Just weeks ago, Merrill brought on Second Life co-founder Cory Ondrejka to give him a hand.
Something fundamental needs to change. Everybody's losing money in recorded music, especially on the new-act side. The overhead required under the traditional model to find and support those acts is far higher than the profits that result. I.E.: unsustainable..
Thus far, the slow-change music industry has done a piss-poor job of leveraging digital technology. EMI's plan is to move quickly toward a model that depends a lot more on the Internet, not only to distribute music, but also to find and support new acts.
Will it work? Nobody knows. But unlike, say, Warner Music, which underinvested in digital while ensuring huge paydays for its investors and executives (more tomorrow), EMI is trying.
Merrill might succeed, or he might fail and depart the company after fighting a good fight. Either way, I'll be proven right. Or, he might quit in disgust by realizing Guy Hands wasn't really serious about fixing the recorded music side of the business and it really was all about the quickest richest payday possible. In that case, Blaise will be the oracle.
Blaise: care to make a wager?

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