Facing The Music

HAS THE MAN FROM UNITED BISCUITS BITTEN OFF MORE THAN HE CAN CHEW AT EMI?
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The Independent Online
The pop pin-up Robbie Williams warbles, "You think that I'm strong, you're wrong, you're wrong" on one of his latest tracks. Of course the song is meant to show that even Robbie, the man who put the "self" in self-confident - has a sensitive, vulnerable side. But he could just as well be singing about EMI, his record company.

EMI has become an institution in the British music industry. From the Beatles to the Beastie Boys, from Tina Turner to the Spice Girls, those three famous letters pop up in every album collection. But the record company has got itself in a spin over the last few years. Succession problems, falling profits, takeover troubles - EMI has been making all the wrong noises.

Now it has a new man to help turn the tables. For years, Eric Nicoli had been more concerned with Jaffa Cakes and Hula Hoops than pop charts. Last month, the former head of the snack giant United Biscuit formally took on one of the most difficult jobs in Britain as chairman of EMI.

Not only will he have to prove he can hob-nob with EMI's disenchanted investors, he will have to tread carefully to avoid trampling on the fragile egos of music executives and pop stars. If that is not enough, the Internet threatens to shake up an industry dominated by a handful of major companies. If the music dinosaurs don't act fast they may face extinction.

So who is this man the tabloids cruelly dubbed the "biscuit bungler" and can he hit the right notes at EMI? With Mr Nicoli's sturdy body and bald patch, the 48-year-old would not look out of place as a member of the band Right Said Fred, or in a rugby scrum. But when you meet Mr Nicoli he comes across as the consummate chief executive, a man with the gift of the gab who uses that gift to its full advantage.

When John Warren, United Biscuit's finance director, first talked to the person he would work closely with for more than 15 years, Mr Nicoli made a big impression. "He is a larger-than-life character, a man who has a very strong personality," said Mr Warren. When he walks into a room, people know he has arrived. "He comes across as very intelligent, jovial and witty," said one City analyst, who has seen him in action many times. Mr Warren added: "If he had not been a chief executive he could have been a stand-up comedian."

Mr Nicoli's "encyclopedic" knowledge of jokes has made him a popular after-dinner speaker. These skills went down well at an event to mark Tesco boss Lord MacLaurin's swapping of his supermarket overalls for cricket whites as the new head of the Test and County Cricket Board. In short, most people agree that Mr Nicoli is a nice guy. Unlike many captains of industry he is somebody you would be happy to chat with over a few beers.

These qualities drew EMI to Mr Nicoli. The last thing the company needed was somebody who was going to ruffle feathers, after a couple of years that have left this once high-flyer battered and bruised. But Mr Nicoli has a chequered record and it could be a tall order to get EMI back on track again. News of his appointment in March hardly set the music world alight - in fact it went down like a lead balloon with some EMI shareholders. They had hoped for a big name in the music industry or a Hollywood mogul.

Up to then Mr Nicoli's only experience of the music industry had been listening to Bob Dylan and John Lee Hooker and strumming his guitar. (He got an electric guitar as a leaving present from United Biscuits.) Mr Nicoli, brought up by Italian parents on a Norfolk farm, went to King's College, London. He landed his first job at Rowntree Mackintosh, moving into marketing, then to United Biscuits. There he stayed, rising through the ranks to become chief executive in 1991. But for a man known for his sense of humour the fall in United Biscuits' share price has been no joke. Under his leadership the company's share price more than halved, wiping more than pounds 1bn off its value. By promising much and failing to live up to some of these promises, Mr Nicoli has not won many friends in the City. "He must bear ultimate responsibility for the fall in the share price - he was very good at analysing why things went wrong rather than doing something about it," said a disgruntled United Biscuits shareholder.

It is too early to say how Mr Nicoli will turn out. But EMI does need a saviour. The group was founded in 1897, named The Gramophone Company, and changed to Electrical and Music Industries in the 1930s. Since then it has left an indelible impression on Britain's popular culture. EMI helped kick-start a musical revolution when The Beatles started crawling all over the charts. A back catalogue that also boasts The Rolling Stones, Pink Floyd and Queen has helped it to grow into the world's biggest music publishing business, spanning more than 70 international record companies and including labels such as Virgin, Chrysalis and Capitol.

But in recent years it has been more a story of the blues rather than rock'n'roll. When the Spice Girls burst onto the scene and took the charts by storm, things looked rosy for EMI. The industry had been struggling to cope with a general slowdown in the growth of record sales. The days of soaring sales - with fans busily swapping vinyl and tapes for CDs - were long gone. But Girl Power threatened to spice up EMI's profits and share price.

Sir Colin Southgate, the colourful and revered former head of EMI, had already put in train a radical restructuring plan, which culminated in spinning off Thorn, the relatively dull Radio Rentals business, to leave a sexier independent music giant. Then things began to go wrong. After the Thorn deal, Sir Colin wanted to take more of a back seat role. He had been in charge of EMI more than 10 years, and the man who made his name as an IT entrepreneur wanted a new challenge. And what a challenge he took on, becoming chairman of the Royal Opera House when it was facing the worst crisis in its history.

The way EMI handled its management succession was a shambles. Eventually, Sir Colin plumped for Jim Fifield, the head of EMI Music, known as "Lucky Jim" for his huge salary, which with bonuses totted up to a princely pounds 7m a year. But Sir Colin's choice did not go down well with his colleagues. The reason Mr Fifield was rejected by the EMI board is still shrouded in mystery. Money must have played some part in it - Mr Fifield did not come cheap. But there are also likely to have been fears that he would have too much power. In the end Mr Fifield lost out in the power struggle but Jim still got lucky, walking away with a staggering pounds 12.5m pay-off.

EMI was exposed and the vultures started to circle. Over the course of 1998 this impregnable music Goliath was being touted as a takeover target. Canadian group Seagram, which owns Universal, privately put in a near- pounds 5bn bid. The embattled Sir Colin said it was not enough and held out for more. Seagram responded by going shopping elsewhere, snapping up Polygram for $10.4bn (pounds 6.5bn). Although the German group Bertelsmann, Rupert Murdoch's News Corporation and Disney also took a look at the business, they too sniffed at the price and EMI was left to fend for itself again.

EMI was still reeling. Profits fell by more than a quarter in the year to March 1999 after a series of weak releases knocked earnings. The much- vaunted release of ex-Spice Girl Geri Halliwell's first album, for example, proved a disappointment.

Sir Colin wanted out as soon as possible, and had started searching for a new candidate. As a non-executive director of the business, Mr Nicoli did have a head-start - he knew the people and the set-up. But the main reason he got the nod probably lies in his management style. Sir Colin liked things run his way. Mr Nicoli is a more hands-off manager. "He believes in getting the right people on board and leaving them to manage," said John Warren. That is important because EMI is desperate to hold on to its top music executives. Ken Berry, the head of EMI's recording business, is one of the most admired executives in the business. Mr Berry has become one of the hottest properties in the industry. If EMI had appointed a rival music supremo as chairman of EMI, Mr Berry could well have walked out of the company.

Mr Nicoli appears to have got off to a bright and breezy start. One source says his approach has been like a "breath of fresh air" in the normally stuffy corridors of EMI's West End headquarters. He also snapped up his first acquisition last week buying Windswept Pacific Music, which owns the publishing rights to songs such as "Shout" and "Mony Mony" and the Spice Girls hits, in a $200m (pounds 124m) deal.

Mr Nicoli is keen to prove his critics wrong but he is saying little about his future plans and strategy. He has a lot to do. "EMI has been hopeless, the management has been terrible," said one leading analyst. Apart from winning over City sceptics, Mr Nicoli's biggest challenge is surely the Internet. This, more than anything else, is likely to make or break EMI over the next five years. EMI, like the other music giants, was slow to realise the Internet's potential, but they have been forced to act, and act quickly.

Music on the Internet is on many web sites. Using MP3, a technology that compresses the content so it can be accessed more quickly, the music can be downloaded onto a disc and played in a specially adapted portable player. DJs have even started turning up at clubs armed only with lap- top computers. The implications for traditional record companies are huge. Piracy is a problem.

More importantly the Internet threatens to loosen the stranglehold the major five record companies have over the industry. Anyone from big name stars to unsigned bands can use the Internet to distribute their music directly to the public, rather than give a cut to the likes of EMI.

But the Internet also represents a huge opportunity. EMI has one of the best back catalogues in the world, and if that can be exploited it is worth a fortune. Jay Samit, a software and Internet guru from Universal Studios, has been brought in.

The group has already announced plans to digitally encode its catalogue so it can be sold online. It has also done a deal with Musicmaker.com, an Internet group which allows its customers to create their own compilation album online by mixing and matching their favourite tracks. In return for giving Musicmaker access to its records, EMI ended up owning 40 per cent of the company. After Musicmaker.com floated on the US stock market recently EMI's stake was worth $155m.

EMI wants to set up kiosks in record stores across America allowing customers to download tracks instantly if they are out of stock. "The Internet was a wake-up call to the industry and EMI has responded loudly and clearly," says Mr Samit. "It is a tremendous source of revenue. Records will never be out of stock again. Music will be downloaded on to anything from car stereos to mobile phones." He describes Eric Nicoli as a man of tremendous energy who is very committed to new media, adding in California- speak: "You quickly pick up a vibe when you work somewhere and this is a great one, we are on a high."

Content is king on the Internet and EMI has plenty of it. But it is the traditional business of new releases that will determine EMI's short- term future. Robbie Williams is trying to launch himself in the US. In line with his typically understated persona his first American album is called The Ego Has Landed. Angels - the song that ensured his solo career took off in Europe - is released later this year in the US. If that goes down a storm it could be a fortuitous start for Mr Nicoli. EMI may have been off key - for investors it has been a case of "can't get no satisfaction" over the past few years. But there are signs of improvement. Its involvement in the Internet has helped its share price finally to perk up.

Mr Nicoli's job - as leader of a band of talented artists and executives - is to make sure he can repair the company's and his own tarnished reputation in the City. It will take time, patience, and luck.

He has the personality to turn his tag of biscuit bungler into music maestro. Now Mr Nicoli has to prove he has got the management acumen to run such a complicated and high-profile business.

At least he is used to facing the music.

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