Music Publishing $

New York Times
April 24, 2006
Music's Hottest Star: The Publisher
By ANDREW JACOBS

Like a dog that responds to high-frequency sounds, Martin N. Bandier has a knack for hearing music that goes unnoticed by most humans. Whether it is a few bars of a Burt Bacharach classic slipped into a car commercial or the wordless strains of a James Taylor cover piped into an elevator, Mr. Bandier, the chairman and co-chief executive of EMI Music Publishing, is astutely aware of his aural surroundings.

It is a talent that has served him and his company well. After attending "Jackie Mason on Broadway," Mr. Bandier left the show in stitches but he could not help but wonder whether the producers had paid for the use of a half-dozen EMI-owned songs (among them "New York, New York," and the theme from the film "Rocky") inserted between Mr. Mason's comic spiels.

It turned out they had not. A few phone calls later, the show's producers were not laughing. A check was cut and EMI, the world's largest music publisher, became a little bit richer.

"The people I went to the theater with didn't even notice there was music in the show," he said. "I can't help myself. It's a curse and a blessing."

Under Mr. Bandier, EMI Music Publishing, a unit of the London-based EMI Group, has become one of the bright stars in an otherwise ailing industry. Buffeted by slumping CD sales and illegal music downloading, the industry's overall profits have fallen by a third since 1999, according to NPD Group, a market research firm.

In 2005, record sales worldwide were down 8 percent, according to Russ Crupnick, an analyst at NPD. "It's been a dismal few years," he said.

After years of being overshadowed by the recording business, the music publishing business is finally being widely recognized as a lucrative one, largely because of the financial travails of Michael Jackson. Hundreds of millions of dollars in debt, Mr. Jackson recently agreed to sell half his share in Sony-ATV Music Publishing, a song catalog that includes many Beatles hits and is worth an estimated $1 billion, at some point in the future.

Although publishers can take in hundreds of thousands of dollars licensing "Revolution" by the Beatles or a Sinatra classic to a corporation, most of its income comes in more modest sums. A publisher pockets 9.1 cents a track for each CD. Mariah Carey blaring out a few bars on a teenager's ringing cellphone might earn a publisher 8 cents.

But those pennies, Mr. Bandier has come to realize, can help fatten up the bottom line. "Our business is kind of a bread crumb business that adds up to a whole loaf," he said.

As a result, music publishing is also getting attention on Wall Street. In recent years, venture capitalists and investment banks have engaged in aggressive bidding wars for lucrative music catalogues. EMI too has snatched up catalogues whenever it can.

In 2004, it spent $80 million to buy the 20 percent it did not already own of the Motown catalogue of Berry Gordy, who founded the label.

"At a time when piracy is taking a huge chunk out of the bottom line a good publisher can find new revenues," said David M. Israelite, president of the National Music Publishers' Association. "Marty has been relentless at finding new opportunities to exploit music."

To counteract the flood of unauthorized downloading, EMI Publishing has been aggressively mining the ring tone business, selling melodies from its catalogue of one million songs to films, television commercials, video games, karaoke compilations and programs like "American Idol," whose contestants have sung more than 400 EMI-owned tunes in the last five seasons, more than those of any other publisher.

Last year, the EMI Group's revenue remained flat but during that same period, EMI Music Publishing's income rose by 5 percent, with its profit up by 3 percent, to $185 million.

Five years ago, album sales made up 60 percent of the company's total income. Now that figure is at 44 percent, with the rest coming from licensing fees, more than its competitors.

Mr. Bandier was a driving force behind the Broadway show "Jersey Boys," which is built around music by Frankie Valli and the Four Seasons (yes, on the EMI roster) and he is exploring productions to showcase other EMI jewels, among them Queen, Carole King and Motown classics.

Then there are the stuffed animals. Piled high in a corner of Mr. Bandier's 42nd-floor office in Midtown, his collection of furry critters are tactile manifestations of how far EMI has gone in squeezing income out of its expansive catalogue. There is a mariachi mouse that croons "La Bamba," a hound dog in yellow slicker that warbles "Singing in the Rain," and a fox that wiggles to "Come and Get Your Love," lewdly opening its pink bathrobe to reveal a flashing red light in its drawers.

"People think I have a fetish for these things," Mr. Bandier, 64, said, chewing on the end of an unlighted cigar. "But sometimes this is the only way to show shareholders and investors what we do."

Mr. Bandier has lately been drawing both praise and criticism for his role as a crucial negotiator in talks that will determine a new generation of rights and royalties governing digital music.

It is an epic battle involving record companies, publishers and digital music providers, and the outcome will affect the industry for years to come.

The praise largely comes from publishing business allies, who credit him with winning generous deals from record companies, including a recent deal with Sony BMG that set rates for digitally distributed songs.

The criticism, much of it offered sotto voce by record and digital music executives on the other side of the negotiating table, paints Mr. Bandier as a bulldog who is demanding too much for his team.

"Marty doesn't roll over for anyone," said Jonathan Potter, executive director of the Digital Media Association, a trade group representing companies like Yahoo, AOL and Apple. "Everyone is trying to cut the best deals they can but some people think the publishers are asking for more than their fair share."

Although music pirating has taken a sizable chunk out of publishing's bottom line, most publishers continue to make money, something that is rarely highlighted in the headlines about the music industry.

Mr. Bandier stumbled into music publishing three decades ago when he and two friends bought the catalogue of CBS Songs. Over the years, Mr. Bandier has gone on numerous buying sprees, snatching up Virgin Music, Windswept Pacific and Filmtrax publishing houses.

"When I made my first deal, I went home and told my parents I was getting into the music publishing business and they had no idea what I was talking about," he said. "To be honest, neither did I."

By the time EMI bought him out in 1989 — and kept him on as president — Mr. Bandier had a fairly good idea what he was doing, with more than 700,000 songs in his pocket, including the themes to the James Bond and Pink Panther films, songs like "Somewhere Over the Rainbow," and the complete works of James Taylor, Billy Joel and Gloria Estefan.

Mr. Bandier, who grew up in Queens and was home-schooled by his parents, plans to step down in 2008. He will be succeeded by his current co-chief executive, Roger Faxon.

Mr. Bandier said he was not musically inclined as a child, although his dream was to grow up to be a member of the Temptations.

"That didn't work out," he said. "But it doesn't matter now because I own all of their stuff."