EMI Resructuring Update & Commentary

The UK’s Sunday Times reported that about 900 of EMI’s 6,600 staff will lose their
jobs as the company seeks to save almost $216 million in overhead. Virgin North
America and along Capital are
expected to be the most efected.

EMI admitted that there could “significant disruption” that would "limit its ability to promote new
records in the last
two-and-a-half months of its financial year" resulting in a sales lump of as much as 10% thru March. The restructuring, will involve EMI
combining label back offices and have recording and
music publishing divisions rely more heavily on shared services. EMI
will also scale back or end operations in 50 countries including parts of Latin America and Asia.

"What the board has realised,” said a spokesman, “is that they need a
different sort of management running the music business — people with
more general management skills, more consumer marketing skills".  (translation: not music people) “We have created a very good team of very strong country
managers, and it is these country heads who really hold the artist
relationships and who really discover the talent. Having Alain (Levy)and
David (Munns) there has become a fairly bureaucratic exercise.”

In related news, there are rumors of a management buyout of EMI’s profitable music publishing arm although a source close to the company told AFX News that such stories are "a million miles away from the mark."

COMMENTARY – The EMI board may actually have it right although it’s unfortunate that two decent (if old school) record guys had to loose their jobs along the way. Now its up to Chairman Eric Nicoli alone to make restructuring work.

The large bureaucracies that
corporations create with layers of VP’s and middle management is not only expensive but slows change.  As the Warner Music Group proved it is possible to eliminate layers and come out the other end with a stronger if smaller team.  Ironically, an already leaner EMI might actually be less attractive to investment groups and merger specialists used to wringing the money to pay for acquisitions from existing fat.

In the end, however, it is doubtful that any of the existing major labels have the guts and foresight to take full advantage of the new paradigm that would – if they made friends again with consumers – allow them to sell more total music spread over more artists (aka the Long Tail) with far lower costs over far longer careers while at the same time monetizing there massive catalogs.

Read Hypebot’s original EMI story for more background here.