By Ethan Smith and Aaron O. Patrick
Link
1/15/2008

In the latest effort to right EMI Group Ltd., the record company announced Tuesday that it is laying off as much as one-third of its employees, slashing marketing expenditures and dropping artists as part of a radical restructuring.

Terra Firma Capital Partners Ltd., the private-equity group that bought EMI last year for £3.2 billion ($6.26 billion), expects to cut costs at the troubled music company by up to £200 million ($391 million) a year through job reductions and by centralizing sales, marketing and administrative functions at EMI. The moves are part of an effort by the private-equity firm to make its investment pay off.

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 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 Tuesday.

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 situation. 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%.
[Edited 1/17/08 17:30pm]

Well as i have been saying this is going to only get worse, until labels, change their marketing and just the way music is put out there. But they wont listen, Sony/BMG is doing this already, WEA will do it, and so will Universal. Labels are run now like the Motion Picture Industry, and the problem now is they are constantly investing tons of money in marketing and its just not worth it, its like throwing money down a hole, as i said before many times if you invest 10 million in marketing on an artist you better sell that much to break even, its exactly like the Movie industry and big budget films, films that cost 100 million to make, need to make 200 million to break even. This is why you will see more and more artists go indie this year, mainly just because its smart business, regardless of who you are, and alot of artists will have to look at whats more important, a chart number, or a check. The investment in nothing but youth totally backfired, as we all said it would.


and just a side note to all this, on Friday nite i got a call from a label friend who told me FYE is shutting down the base store, for those of you in NYC, the base store is the Rock/Plaza location, this was once the Sam Goody location till the mid 90's than it was coconuts than FYE, well, FYE decided it wasnt worth the rent anymore and is closing, no liquidation, no sales, just drop the gate and fire the employees with no notice. And the Virgin NYC stores may be next, at least one of them.

[Edited 1/15/08 10:02am]
[Edited 1/15/08 10:05am]

I hope they all end up in the ground.

It's what needs to happen. Maybe it'll scare off the robots running things or make them human enough to return to actual music and artists.

We know now that in addition to records being nearly dead for most listeners, image and packaging is gone, so there's no motivation for the fluff.

Well one thing looking at this article that is troubling, not really troubling, but brings me back to something PRINCE said back in 2004, that people at labels dont even know who's signed. And that is so true when you look at the figure of EMI's roster, 13,000 artists! and Emi is considered a small label to what the other have, and 30% of them not even recording, this is like Baseball and paying a guy a million a year to sit on the bench. I also disagree with this group that emi has signed on, i dont think the issue is going to find new artists and invest in them, that to me REEKS of lets get rid of all the old people and get new kids, which is just same model that everyone is using and losing big time with. So i cant blame artists like Coldplay and Robbie Williams for holding back because they are partially the reason that the label hasnt gone under, along with RadioHead,Norah Jones and the Beatles catlogue.

I work at EMI and am sad to say I hope I'm one to get let go...I no longer love it here...it's not the company I worked for years ago...

It's sad but the death of the music industry looms near...I dont want to be here for that!

...

I have gotten nothing but hell from record labels for the last 15 years so I say...DIE DIE DIE !!!!

Dance said:

Music Industry will never return to actual music and artists

Apple is just replacing them...

And Apple doesn't even need artists to make money...

For the very first time, we see emerging a single company controling every aspect of the music industry

And Steve Jobs doesn't give a damn about music...

At least major labels helped talent to emerge real talents...

lastdecember said:

Whoa! I went there a couple of months ago with a friend of mine and now it's about to close? Unbelievable. I must say, compared to other record stores, FYE didn't seem to have as many stuff as Virgin or even Tower when it was around. The music industry is in a REALLY BAD way and I'm scared to think of which Virgin store may be next. I'm thinking the one on Union Square. It's sad

VANITYSprisonBYTCH said:

That is so sad to hear you say that. No one should have to be in this position and I don't blame you for wanting to be nowhere near the place when it collapes and it's going to collapse. I wish you the best regardless of what happens with EMI.

krayzie said:

I think there will be a shift back to the real. There's still a significant amount of money to be made.

Apple isn't replacing anyone nor does it control anything. Apple deals with a speck of all the downloading going on.

All these people who seem to be setting up shop with Itunes or who are creating their own are kidding themselves.

VANITYSprisonBYTCH said:

I agree, i was actually happen when i got out of it in 2006 when we closed up, i had been doing it for almost 18 years and i would say the last 5 of it were pretty much going through the motions. Though i was in the actual store, i was an assistant to the company buyer who is well respected in the RB market, and i think the more i learned from her the more i got a bad taste about everything that was going down, and this had nothing to do with going digital and the decline of cd sales it was something much deeper and uglier. I also dealt with the labels day in day out and worked close with the reps they would send us, but as the years went on you would see less reps working the actual "artists", and all the hard work i would do to assist them, pushing new artists when i thought they were worthy, was really for nothing because the higher ups werent interested in selling the "artist" anymore, though i do miss some things, the perks like listening parties and meet/greets and things like that, i have retained enough insiders with that, that i can still get into something if need be, but i dont miss the bullshit that went on in the last few years, oh the things that you wouldnt believe that goes on.

purplecam said:

Well i blamed the "big box" mentality on this, FYE adopted it and its losing, Sam Goody sold its soul to it and it killed it. Tower and Virgin remained true music retailers but got no respect from the labels. For those who arent/werent in this kind of job, it really works like this, Tower,Virgin have to charge alot of money for cds because of label greed, labels charge these stores 13 dollars now for a new cd, 13 dollars my friends, how the hell are they supposed to compete when Best Buy can afford to lose 3 bucks a cd (well not much longer since they are downsizing their music depts 30%), so what will get lost is mainly selection, i know everyone says just download it or find it, but that isnt an answer since digital sales are already slowing up, and are not even close to closing the gap of the declining music sales. So had labels adopted a flat price for a cd, like Gaming stores do, where everyone had to charge the same price for a cd, then you could have saved alot of retail and at the same time, dropped the cd price to the download level. But in the end its gonna come down to just not invest all this money in the "younger" artists, sorry to say it, but the sales do not warrant it, and the facts are facts that most kids dont even pay for the music, as Steve Jobs even said, everyone has an iPod but only 2% of people are downloading from iTunes and im guessing maybe less than half are legally getting the music.

Dance said:

You ignore what's going on in the music ??

Nobody makes money from music recordings... That's why indie labels still prefer traditional CDs over digital files to control revenues...

In this decade, people have never been exposed to so much music, people have never had so many choices, music has never been so cheap and affordable, and MUSIC HAS BEEN SO BAD...

I've worked in the music for years, and I'm not surprised by what's going on these days...

Dance said:

Are you smocking crack ???

Hell yeah, Apple is replacing the Labels, they control the ENTIRE digital market...

Ipod is the biggest selling digital player, and Itunes is the biggest digital store...

The entire digital market is controled by a single company : Apple...

It's never going to change... Apple can do whatever they want...

krayzie said:[quote]

Dance said:

This was coming, how no one saw how one company would take over, just look at all the labels have folded/merged, i can guarantee that Universal will at one point be the last label and it will deal with Apple and Apple will buy them. So like Viacom and clear channel owning all the airtime/tv time you will soon have one company owning every artist and every way music is put out. Sounds a little like Germany in the 1930's to me.

krayzie said:

The real money made in the industry isn't from record sales. As someone who claims to work in the industry, you should know that. Like I said, there's plenty to be made, so people will always be there.

The digital market barely exists. If you ask the average listener where they got their mp3's they won't tell you Itunes.

Dance said:

Nope, you didn't understand, I repeat again what I've said : Nobody makes money from music recordings... That's why indie labels still choose traditional CDs over digital music to control revenues...

That's why I said there won't be any shift back to the "real".

This is not what's going on...

Dance said:

Oh yeah my friend, the digital market exists and is growing very fast... And it is totally dominated by Apple...

An if you didn't know the average listener that buys digital music got their mp3's from Itunes...

That's why Itunes is the biggest digital store so far...
[Edited 1/19/08 9:57am]

I think we all saw the writing on the wall on this years ago.

DIE DIE DIE !!!!!

Dance said:

So true. The money was ALWAYS in the tours/performances. The money you make actually making music or selling it to stores/digital sites is lesser than what they tell you.

I think Music World is closed at least in my city. I think it's a Canadian chain.

Timmy84 said:

At this point labels have just driven away everything. Music retail is non existent right now and dropping so quick, i can almost guarantee tha by the end of 2008 you will see the end of FYE as a chain and Virgin Megastores (though they only have 12 left) and top that on to the reduction in stock levels at Best Buy and Walmart to cut stock down 30%, cds will become non- extistent, which would be fine with labels, but theres an issue, digital is not catching on enough with the right people that they want. Truth is the 29 and up crowd are the ones buying cds, but they arent all jumping at digital, so the losses are mounting and digital just isnt filling the hole. But lets not forget that everytime a retail store/chain goes so does the revenue that the labels get from the stores buying their stuff, labels, though they vary, charge stores anywhere from 11-14 dollars for a new cd, thats big money for them, but if there are no retailers they are screwed, now of course digital outlets sell for 9.99, but with digital and labels wanting cuts of that money, the artist is left with enough for a phone call from a digital sale. The point is the labels from day one never intended on budging on CD prices, as a matter fact they raised the cost to stores in the last 2 years.

As for touring, well thats always been a strong payday, BUT the issue mainly is, the artists that labels are pushing no one is going to see, almost no one topping the charts can even sell out a show, with the exception of Beyonce and Justin, they are the only artists under 30 that have even been able to sell out shows. So as always the old timers have to keep the industry going, the stones,Jovi,Elton,Billy, and countless country acts are still packing shows regardless of ticket prices. The labels are in big trouble, and i mean all of them, not just EMI, they arent doing good business. They are funneling money into projects that just arent delivering, its kind of like George Bush mentality, and thats why america is heading for a recession. Its just like the motion picture industry, when you make a movie you have to make the same money times two back to break even. So when a label like Universal shovels 20 million into marketing Rihanna (not counting tour expenses), she would have to generate 40 million in revenue to break even, and no one is even coming close to that number.

Why the hell would anyone go back 2 EMI after 1997? I worked there in 1997 when it shut down.

Supply and demand, if the product is good people will buy it, plain and simple. If the music sucks, be it on a major or indie label, nobody will want it. So they can hire and fire their workers and drop artists and find "the next best thing" on American Idol, bottom line, they will keep making the same mistakes if they don't start acting humble.

Thriller81 said:

Graycap23 said:

Lmao i was on the Service list.. and man... ikept gettin shit product

IAintTheOne said:

if you guys say ONE more thing about the Spice Girls...

lastdecember said:

Which is one reason why I say this is a great thing, and that we'll return to the real. There's money out there. Those greedy f-cks aren't going to ignore that. The classic artists can only do it for so much longer and there are only so many of them. If the suits in place now won't make the investment in finding and developing real talent, and allowing them to find an audience, someone else will, and then it'll build from there.
[Edited 1/19/08 15:50pm]

Dance said:

Well i agree, and its so hard to believe that no one up there at a label sees that. Labels tend to believe that the reason "older" artists tour strongly is because people turn up to see the old songs, which is true for a %, but they should just look back, say, 20 years at a chart from the 80's and see that age had nothing to do with it, and the ironic thing the "older" artists they speak of were the same ones that people were going to see back than, and many didnt have "old songs" yet.

Dance said:

Nope, not at all...

This is not what we see these days...

Again, the facts show that things are getting worse...

And on that matter, the so called suits in place have no responsability for the current situation...

The so called suits in place would love to find and develop real talented people, ONLY if they are guaranteed to sell massive units...

At the end of the day, labels support what sells...


The fact of the matter is, you can't convince labels to invest in talented artists if the public doesn't like them...

Again, people have never been exposed to so much music, people have never had so many choices, music has never been so cheap and affordable, and MUSIC HAS NEVER BEEN SO BAD...

Cinnie said: