EMI Changes the Game

[busybeeburns]

 

New CEO pledges to reinvent record biz with massive cost-cutting

 

In early 2007, EMI was a mess. The U.K.-based music company — the smallest of the four major labels — had lost $500 million in a year, its market share had slipped to nine percent, and marquee artists Radiohead and Paul McCartney had jumped ship. When private equity firm Terra Firma bought the label for $4.7 billion in May, many speculated that CEO Guy Hands would dismantle the company, retaining the profitable publishing arm and back catalog. Instead, on January 15th, he announced a vast overhaul that he hopes will transform EMI into a smarter, leaner and more profitable company, offering the rest of the failing music industry a road map for the future.

How does he plan to do that? By cutting costs, for one thing. Hands was appalled at the label's wastefulness, citing expensive gifts sent to artists, multimillion-dollar severance packages for executives and salaries that rose even as revenues dropped. "For everyone who runs a major label, making change is a big personal risk," he says. "If you just keep things quiet, you can continue to earn some pretty massive salaries for a few more years until the whole thing comes to an end."

 

In the new EMI, most functions, including marketing, promotion and distribution, will be centralized, while duplicate departments at imprints such as Capitol and Blue Note will be eliminated, cutting 2,000 employees (about a third of the company). The individual imprints will continue to exist but will be limited to A&R staff, who will focus on recruiting talent. Hands also points to EMI's global roster of 14,000 artists as unsustainable, promising to slash unprofitable acts or release their music in limited ways (only in certain regions, say, or just as digital downloads).

 

And he plans to increasingly use corporate sponsors to defray the costs of producing and distributing music — Nordstrom, Victoria's Secret and the New York Daily News have all paid for the right to put their brand on music from EMI artists, including Joss Stone and the Spice Girls. Hands dismisses managers critical of the move. "Does the Royal Opera in London feel upset that Barclays sponsored a performance?" he asks. "I think it's very strange that the pop and rock genre is more sensitive than classical music and opera." Hands also plans to increase revenue by leveraging the label's vast catalog, which includes the Beatles and Coldplay. In one early example of this, EMI is releasing a Radiohead hits package this year without the band's approval.

 

With sales down thirty-six percent since 2000, there is a growing consensus throughout the industry that change is needed. Over the past few years, Sony BMG, Universal and Warner have laid off hundreds of employees, and all four majors have been combining redundant departments, cutting back budgets and signing fewer artists. "The other labels are going to look at what's happening at EMI," says Scott Booker, who manages Warner artist the Flaming Lips. "They're already doing it. Warner has been slowly letting people go for a while now."

 

When Terra Firma bought EMI, many in the industry accused Hands of attacking a business he didn't understand, and top EMI artists Robbie Williams and Coldplay complained when U.K. chief Tony Wadsworth was pushed out. And financial analysts wonder if Hands' inexperience led him to overpay for the company. But five weeks after he announced his plans, critics are starting to come around. "It's sad when you see people getting let go, but anyone who bought this company would have made the kinds of changes that are probably in the works," says Coldplay manager Dave Holmes.

 

Hands has been on a tour of EMI's global offices to sell his plan and soothe rattled nerves. "The further away from London you get, the better the reaction is," he says from a stop in Japan. "When you say, 'Look, this isn't working, we're going to stop the model,' you expect a reasonably strong reaction." Many affiliated with the label are withholding judgment until the first round of significant layoffs, expected in the coming weeks, hits. "Much will depend on his ability to pick and choose the people who are involved with creating the success that EMI once had," says Sam Feldman, who manages EMI artist Norah Jones. "Our business is dependent on relationships and people, like a Moroccan bazaar: 'Who's selling the real carpet?' And if you don't know, you're kind of in trouble."

 

http://www.rollingstone.com/news/story/18691674/emi_changes_the_game

[MrMagpie]

Guy Hands:veryangry2: