LONDON (Reuters) - Guy Hands, the private equity owner of EMI, plans to cut up to 2,000 jobs at the ailing British music company, in a plan to rebuild the group which has sparked fury from some of its biggest acts.
Hands, previously best known for investment in waste management and pubs, on Tuesday unveiled his plan to make the home to The Beatles more artist-driven after it was hit by online piracy, falling CD sales and a poor release schedule.
In the list of Britain’s biggest-selling albums in 2007, EMI’s highest entry was Lily Allen’s Alright, Still at 26.
The worldwide cuts will come at EMI’s troubled recorded music division, which has some 4,500 staff of a group total of around 5,500. The shakeup, in which between 1,500 and 2,000 jobs will go, is designed to boost its roster of talent and increase Internet sales while reducing costs by 200 million pounds ($393 million) a year.
In a bid to allow EMI’s labels such as Capitol and Parlophone to focus on finding new artists and promoting digital music, the company plans to bring its marketing, sales and distribution under a single division over the next six months.
But the plans have angered top-selling artists such as Robbie Williams, who questioned whether EMI would be able to devote enough time and money to promote his work.
“We have spent a long time looking intensely at EMI and the problems faced by its recorded music division which, like the rest of the music industry, has been struggling to respond to the challenges posed by a digital environment,” Terra Firma boss Hands said.
“The changes we are announcing today will ensure that this iconic company will be creating wonderful music in a way that is profitable and sustainable.”
The announcement follows a three-month review by Terra Firma which bought EMI last year for 2.4 billion pounds, or 3.2 billion pounds including debt, after years of speculation about the group’s future.
At the time of the purchase, Hands said EMI would look to increase its digital sales, keep the company intact and securitize its more reliable music-publishing assets.
But that last proposal, which would have allowed it to borrow against revenue from the publishing division, has been put on hold due to the credit crunch. Terra Firm’s management style has also drawn criticism from its artists and raised eyebrows within the industry.
British group Radiohead left last year, describing management as behaving like “confused bulls in a china shop,” while Paul McCartney quit, saying the company was “really very boring.”
And it has all been played out in the world’s press, keen to see if Guy Hands and his “suits” can turn the company around. He had to be escorted by aides past a scrum of journalists on Tuesday morning as he went to meet staff in central London.
One employee of four a half years left the meeting saying it had been “inspiring” but the rest remained silent.
Most industry insiders and observers accept EMI has struggled more than other majors and that a new approach is needed. It has continually struggled in the United States, the world’s largest music market, where it fell behind dominant Universal Music Group, Sony BMG and Warner Music Group in album market share.
“Everything in the music business right now is potentially risky,” Mark Sutherland, global editor of trade publication Billboard, told Reuters.
“The industry is changing incredibly fast. Certainly this plan acknowledges those changes and attempts to address them. Whether that will be enough to turn around their performance remains to be seen,” Sutherland said.
“If they can get the artists to buy in then they’ve got a good shot for success..”
Additional reporting by Mike Collett-White and Matt Cowan; Editing by Gavin Haycock and David Holmes