Not many people can remind us why their brand is great, at little or no cost.
I was going to start this by writing “Richard Branson is in the news again” and then I realised that the statement was probably tautologous; that’s his job, right? Anyway, this time it’s all about Richard possibly joining forces with Patrick Zelnick, who now runs Naïve Records in France, in the acquisition of Virgin Records: Yes, the company that Richard used to own. Universal may have to sell the EMI-owned label as part of a deal to gain regulatory approval for its acquisition of EMI from Citigroup. Citigroup of course own EMI after the spectacular failure of Guy Hands and his Terra Firma buy-out machine, when they took one step too far with the EMI acquisition in 2007, paying a spectacular £4.2Bn for it at the time.
The appearance of Napster in 1999 saw the beginning of a fundamental technology-driven change to this rather traditional industry. Digital downloads have very different properties and economics to the old LP, or even CD for that matter, and then on top of that, apparently out of nowhere, came iTunes and Spotify. That takes a lot of adjusting to and the traditional part of the industry is still adjusting.
The European Commission are putting a lot of pressure on Universal, who interestingly have agreed to buy the EMI assets from Citigroup for $1.9BN, irrespective of the outcome of the regulatory process, to offload some of its assets so that the combined group doesn’t exceed 40% or so market share. Universal, the world’s largest music company, has about a 30% share and EMI 10% or so. One of the possible labels to be sold off is Virgin Records, which Richard Branson was forced to sell in 1992, for £510m, in order to fund his airline battle with British Airways at the time. Virgin Records was where it all started for Richard, with Tubular Bells in fact, so I guess there is a little nostalgia driving this move as well as a commercial opportunity.
Almost as interestingly, for me at least, is the support for this Universal – EMI merger from the same Patrick Zelnick who feels that, in the face of the dominance of iTunes, the combined strength of Universal and EMI would be good for the industry overall. Well, that may or may not be true, but I can certainly see how it would be good for this potential Virgin Records deal too. In fact, he has not only written a piece for the FT about it but he has also said he will resign from Impala, a European lobby group representing independent labels, as they are still against the deal in spite of Universal offering them the right to bid for various repertoire and rights worth up to $250M – small beer perhaps, but something.
Richard is clearly a smart man and I guess apart from nostalgia there are many benefits to rising the profile of the flagship Virgin brand: it may make him some more money, but I doubt that is really a driver; it will get him more press coverage, which undoubtedly is; and it will do wonders to remind us all what the Virgin franchise stands for. Virgin, personified by Richard Branson, is the quintessential challenger brand and by challenging the supremacy of the behemoths of the music industry once again he will do his airline, train, broadband and other businesses a power of good; it will strengthen the brand’s positioning in the minds of the older generation and maybe introduce its heritage to a new generation for the first time.
This deal would be fantastic for anything with a Virgin sticker on it. In fact, just talking about it will be beneficial; Richard doesn’t actually have to do much else to have an impact. Apart from the possible deal’s other benefits, I think this is a master class in PR and what Richard does best after all.
Tubular Bells was very good too and always worth revisiting.