EMI threatening to quit int'l trade group


NEW YORK -- EMI has tendered a conditional resignation from the International Federation of the Phonographic Industry.

The resignation from the London-based trade group came via a letter obtained by Billboard from EMI general counsel Chris Ancliff to IFPI chairman and CEO John Kennedy. The exit would go into effect March 31 unless "discussions with the other major labels over the future structure and funding of the IFPI and the national industry bodies ... lead to a solution that we are able to support."

The letter was dated Dec. 21. But top executives, legal and government affairs officials from each of the four major labels have been meeting "for four months now," said a source with knowledge of the discussions, in order to assess the value, effectiveness and efficiency of IFPI, the international trade body, and the U.S.-based RIAA.

The working group of major-label executives is discussing the consolidation of music industry trade groups -- particularly the merging of the IFPI and the RIAA. But the EMI letter is the most concrete indication that some urgency is attached to the discussions.

"What can be accomplished by one global trade group would be preferable and more cost-efficient than two," the source said. "The challenges are structure and operation: how the global group would communicate with regional groups, what their mandate would be, how they would be organized, who would lead it. The initial sense is it would be neither (RIAA chairman and CEO Mitch) Bainwol or Kennedy. But it's obviously very early in this process."

Another source who has taken part in these discussions characterized them in a slightly different light.

"What is being proposed is that very big functions be merged," the source said. "Not everything goes into one, done and dusted. But there are some big, key functions that would potentially be merged, such as anti-piracy enforcement or lobbying."

These issues were first reported by Billboard on Nov. 28. Then, EMI Group chairman Guy Hands reportedly claimed in a letter to the other majors that it costs labels $250 million globally per year to support the international body plus its affiliates the RIAA and British Phonographic Industry.

Not so, an IFPI spokesman insisted in the Dec. 15 issue of Billboard. The spokesman estimated that the global figure contributed to all labels' bodies totals about $130 million, with IFPI's overall cost to the four majors coming in at "around 15 million euros ($30.9 million) annually." The RIAA tax return for the year ended March 31, 2006, listed $44.9 million in membership dues.

But according to multiple sources with knowledge of the discussions, the working group, which does not include representation from the IFPI or from the RIAA, seeks more than just cost-cutting measures. "It's more about making sure that the organizations and the way they are structured make sense and are in synch with the way the business operates now," one source said.

IFPI claimed in the earlier Billboard.biz report to operate "hand in glove" with national groups as an international support machine, with minimal overlap. "Our work," the spokesman added, "complements that of our biggest and most important national affiliate, RIAA, and of the BPI." About 83% of IFPI's costs, he said, are "related to anti-piracy enforcement and lobbying activities."

The timing of EMI's would-be resignation appears to be at least partially motivated by financial concerns, as the letter references IFPI statutes dictating the timing mechanisms of payment obligations by the major labels.

"We feel that the most pragmatic approach is for EMI to serve notice now, but to express our willingness to continue to fund the IFPI on the current basis through the end of March 2008," Ancliff's letter reads. "If, as I hope, we have by then found a new funding structure, we would intend to re-establish our membership on that new basis. If not, we would discontinue funding beyond 31 March."

There is no formal timeline within the working group as to when final recommendations will be made, and at least one informed source expressed doubt that resolution would be reached before March 31.

It remains unclear whether EMI is considering a similar resignation from the RIAA. EMI and RIAA spokespersons declined comment, but the IFPI in London acknowledged the receipt of the letter and issued a statement Wednesday.

"It is well known that IFPI's major members are reviewing the structure and operation of the organization and its relationship with the national groups, with a view to finding greater efficiencies and cutting costs," the IFPI said.

"This is prompted by falling industry revenues resulting from the decline in global music sales," it added. "The review is being undertaken by a group of senior executives from each of the companies and IFPI staff, and it is already in progress. Everyone wants to complete this process as quickly as possible. In the meantime IFPI's work, representing our members' interests across the whole spectrum of our activities, is continuing as normal."

Bill Werde is deputy editor at Billboard.