Summary:

Terra Firma’s much-anticipated restructuring of EMI will result in major job cuts and a fresh equity investment, according to reports on the…

Terra Firma’s much-anticipated restructuring of EMI will result in major job cuts and a fresh equity investment, according to reports on the eve of the announcement. Up to one third of the company’s 6,000 employees may be let go, and it may drop many of its unprofitable bands. Other points in the plan include lowered marketing costs and an increased emphasis on artist recruitment. Meanwhile, the company may be readying a fresh £200m ($391 million) investment. Such a raise would contradict reports from last year that the company (along with WMG) was having trouble finding fresh capital. Already, the plan has drawn the ire of the managers of EMI’s top artists, including Robbie Williams and Coldplay, who are concerned that marketing will now be done in a more centralized manner. They plan to express their frustration to Terra Firm chief Guy Hands following the meeting.

FT: “Mr Hands hinted at a clear-out of EMI Music’s roster of 14,000 artists, saying just 200 of them made most of its revenues each year. About 85 percent of artists lost money for their labels, he said, and EMI spent £70m a year subsidizing the 15 percent who would never produce an album. The group had exceeded marketing budgets by about £60m a year, he added, and wasted £25m a year on scrapping unsold CDs.”

WSJ: 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.

FT’s interview with Hands is here:

– The record business – in which 85 percent of artists are lossmaking and EMI pays £25m a year to scrap unsold CDs – “is stuck with a model designed for a world that has changed and gone forever”, he says. His solution is to switch from pushing CDs to pulling consumers towards music in different forms. One element will be focus groups. “People say the music industry is more creative and the customer doesn’t know, only the creatives do.

– Surprisingly, he says that Radiohead, the band that ditched EMI last year to launch their latest album online, made the right choice. “Radiohead had the right idea. They understand their fans. They realise some of them want the premium box set. I’m one who bought one, and paid the full price. What Radiohead showed the industry was that it isn’t one answer for all artists or indeed for every customer.”

Last week, an outline of EMI’s digital strategy emerged. Part of the plan is to offer artists better deals that take into account the increased significance of digital.

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