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'Elevator music' provider Muzak files for bankruptcy protection

It cites debt and the closure of stores.

February 11, 2009|Tiffany Hsu

It's time to face the Muzak.

Muzak Holdings, the company that has filled waiting rooms, shopping malls -- and most famously, elevators -- with syrupy sweet background music for decades, filed for Chapter 11 bankruptcy protection Tuesday in Delaware.

The Fort Mill, S.C., company blamed long-standing debt and a financial market downturn. But a slew of store closures is also at fault, executives said recently, as the continuing recession causes struggling businesses to cancel their Muzak accounts.

The company also faces increasing competition from Sirius XM Radio and music-branding companies.

Founded in the 1930s, Muzak made its name by producing nerve-calming instrumental background music for doctors' offices and workplaces.

Its ubiquitous presence in elevators, where it was piped to mask the unnerving squeals and groans of the contraptions, inspired the term "elevator music." Webster's dictionary defines the style as "variously regarded as being bland, monotonous, etc."

Rocker Ted Nugent once offered to buy the company for $10 million, saying he planned to shut it down. Despite critics, Muzak has been played in Eisenhower's White House and during NASA space missions.

The company now maintains a catalog of more than 2 million songs used by more than 350,000 clients.

Its "environmental" mood music is delivered via satellite on channels with names such as Cashmere (adult contemporary) and Rawhide (country classics).

The company also arranges playlists customized for clients, which have included footwear retailer DSW Inc. and McDonald's Corp.

"Muzak is a solid business with an outstanding customer base, but we are burdened with substantial debt obligations established over a decade ago," Chief Executive Stephen Villa said. "We believe Chapter 11 will provide us with the opportunity to right-size our capital structure and gain financial flexibility."

In its bankruptcy filing, Muzak reported more than $320 million in assets and a debt of $465 million. It owes money to companies including Virgin Records and groups such as the American Society of Composers, Authors and Publishers. Fourteen Muzak affiliates also filed for bankruptcy protection.

The company has been pursuing a merger with one of its main creditors, Texas-based DMX Inc., which matches music to businesses. The combined business would be sold to a third party but is being stymied by a shortage of offers, Villa said in November.

In January, Muzak laid off dozens of its 1,250 employees.

"Muzak is blessed and cursed to dominate a genre that unfortunately doesn't have the hippest reputation," said Danette Christine, who runs Soundtrack Marketing, a Glendale-based music provider to businesses. "Being an old company, they were developing based on the old music models, but they must have missed a step somewhere because music is done differently now."

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tiffany.hsu@latimes.com

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