Music unit to break off from trade group

In a move designed to get major music trade organizations to reorganize, EMI has made the first step to exit the British trade group IFPI.

Top operating executives at the four major labels are in talks, seeking changes in the structure and priorities of major trade orgs, including the Recording Industry Assn. of America. The idea of merging the IFPI and RIAA has been broached as well.

Following the guidelines of the Intl. Federation of the Phonographic Industry, EMI sent a letter the last week of December to IFPI leadership stating that the company would file to leave the org if the structure and aims of the IFPI are not aligned with the interests of EMI.

A source close to the negotiations said all four major labels are in talks with IFPI about altering its course.

“This is not about cost-cutting,” the source said. “Functions and structure need to make sense to all major labels. Right now, funding them doesn’t make sense.

“This is not a case of just saying bye-bye (to trade orgs). In some countries, the trade bodies are also collection agencies.”

One idea that has been floated by the majors is a consolidation of the IFPI, which represents 1,400 record companies in 75 countries, and the RIAA into a single unit. Both groups focus on piracy issues and lobbying.

EMI’s move appears designed to force the hands of IFPI and RIAA, asking for a proposal on how the IFPI intends to reorganize by the end of March. EMI’s letter says it intends to stop funding the organization on March 31, although there is some doubt that EMI would leave the org that quickly.

EMI’s new owner, Guy Hands and his Terra Firma fund, has been looking at a number of ways to make the company more cost-effective. In November, Hands started to question the value of trade organizations. There has been some dispute as to how much is actually spent to keep the orgs funded: Hands came up with an annual figure of $250 million, while the orgs themselves say it’s about one-tenth that amount.

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