The Wall Street Journal-20080114-EMI Is Set to Slash Jobs- Drop Artists
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EMI Is Set to Slash Jobs, Drop Artists
In the latest effort to right EMI Group Ltd., the record company is set to announce tomorrow that it is laying off as much as one-third of its 6,000 employees, slashing marketing expenditures and dropping artists as part of a radical restructuring, according to people familiar with the company's plans.
The moves are part of an effort by Terra Firma Capital Partners Ltd., the private-equity group that bought EMI last year for GBP 3.2 billion ($6.26 billion), to make its investment pay off. Most of the job cuts are expected to come from EMI's recorded-music operations, as opposed to its successful music-publishing operations.
The plans come as the music industry as a whole has struggled to return to profitability -- and indeed to prove itself viable in the long term. Album sales in the U.S., including online album sales, plunged 15% in 2007, according to Nielsen SoundScan, and paid digital downloading hasn't grown nearly quickly enough to make up the loss from the decline in CD sales. Increasingly record companies have cast about for new sources of revenue, including getting involved in artists' deals to license their names and likenesses, licensing music to Web sites in exchange for a cut of ad revenue, selling T-shirts and the like. So far the results have been modest compared with the magnitude of the decline in sales that the companies face.
The planned restructuring has already drawn protests from managers of more than 20 prominent EMI artists, including pop star Robbie Williams and rock band Coldplay. A group of managers who have informally dubbed themselves the Black Hands Group -- after Terra Firma chief Guy Hands -- plan to discuss their grievances with EMI's new owners tomorrow, the same day the company plans to announce the restructuring at a London movie theater owned by Terra Firma.
EMI's new owners are unhappy with the relative size of the company's investments in talent scouting and marketing -- they believe EMI spends too much on marketing the acts already on its roster and not enough on finding new ones, according to a person familiar with the plans. And Terra Firma has said that as much as 30% of EMI's 13,000 artists never release an album -- which Terra Firma feels is too many unproductive artists, many of whom need to be cut.
If the cuts to marketing budgets, in particular, are as deep as some fear, Mr. Williams and Coldplay -- two of EMI's biggest acts -- are considering not delivering their next albums, which had been expected soon, according to people familiar with their thinking. Such a move could be financially ruinous to EMI's fiscal year, which ends in June.
Among the managers' complaints: Mr. Hands's desire to centralize marketing in a way that artists and their managers fear would mean less effective promotion in various international markets. Mr. Williams has an unusual relationship with EMI in which the two parties' fortunes are uniquely tied together in a joint venture funded by EMI; the venture's profit is split between artist and record company. Nonetheless, his manager, Tim Clark, last week blasted EMI's new owners as "bean counters" and threatened to withhold his client's next album.
An EMI spokesman dismissed Mr. Clark's grievances, made in an email and in interviews with British newspapers, as a play for extra cash. "It is an enormous shame that someone who has made so much money out of his relationship with EMI in the past has chosen to criticize the company before even listening to what its plans are," the spokesman said.
Several facets of EMI's plans are unclear, including the role of Roger Ames, the music industry veteran who has been running its North American operations since last year. Mr. Ames also recently assumed duties running artists and repertoire, or A&R, in the United Kingdom, following the ouster of Tony Wadsworth, who had run the U.K. operation. It isn't clear whether Mr. Ames is to be given a hand in running the company.
The music industry has suffered in recent years, but EMI has fared even worse than its three major competitors. Last year it slid to No. 4 of four music companies -- after Vivendi SA's Universal Music Group; Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG; and Warner Music Group Corp. -- from No. 3 in terms of market share and revenue, and saw its market share in its home country slide to 9% from 16%.
