EMI CUTS TO THE BONE

Terra Firma boss Guy Hands issued his strategy for EMI the only way he knows how—by e-mail—announcing plans to cut almost 2,000 employees, representing savings of $400 million, from a London theatre.

The series of "wide-ranging initiatives" within its Recorded Music division will enable the group “to become the world’s most innovative, artist-friendly and consumer-focused music company,” according to Hands.

According to unconfirmed published reports and industry rumor-mongering, as part of the restructuring, EMI's management hierarchy will have industry veteran Roger Ames as President North America and U.K., Ashley Unwin as COO North America and U.K., JF Cecillion as President International, Chris Roling as COO International Labels, Billy Mann as Global Creative officer and Caryn Tomlinson as SVP Artist Relations in a Labels/A&R division.

In Music Services, Mark Hodgkinson is EVP Global Marketing, David Kassler EVP Artist Projects, Ronn Werre EVP Global Sales, Mark Clasper EVP Marketing Sales Operations and Stephen Alexander EVP Studios & Archive.

Hands proceeded to unveil what he calls “a fundamental reshaping of the business to reflect the rapidly-changing nature of the music industry.”

These include:

*Repositioning EMI’s labels to ensure they will be completely focussed on A&R and maximizing the potential of all their artists

*Developing a new partnership with artists, based on transparency and trust, and helping all artists monetize the value of their work by opening new income streams such as enhanced digital services and corporate sponsorship arrangements.

*Bringing together all the group’s key support activities, including sales, marketing manufacturing and distribution into a single division with a unified global leadership.

*The elimination of significant duplications within the group to simplify processes and reduce waste.

The changes, which will be implemented over the next six months, will “enable the group to invest more in its A&R operations both to identify and sign promising new artists and to maximize the potential of its existing roster.”

Hands says the restructuring is being carried out following a three-month consultation review of the business by Terra Firma since it acquired the business last year, claiming many of the measures being implemented have come “at the suggestion of staff, artists or their managers.”

The restructuring will reduce headcount by between 1,500 and 2,000 and reduce costs by up to £200 million ($391.5 million) per year.

Said Hands: “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.

“We believe we have devised a new revolutionary structure for the group that will improve every area of the business. In short. it will make EMI’s music more valuable for the company and its artists alike. 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 restructuring will centralize marketing, sales, and administrative functions at Capitol, Virgin and Parlophone, with the emphasis shifted towards artist discovery and development.

Two executives inside EMI told the L.A. Times that EMI will become the first major label to eliminate the large advances customarily paid to proven artists. The company instead will pay retroactive compensation based on how well a recording sells, according to one.

Meanwhile, Terra Firma has reportedly secured an additional £250 million (almost $500 million) in fresh financing, a considerable accomplishment given tightening credit conditions. Hands outlined a six-month window for the changes.

Hands bought EMI after losing out in the bidding for Thames Water, which supplies 8 million Londoners, and drugstore chain Alliance Boots. He built up Nomura Holdings Inc.'s buyout business in the 1990s before leaving to start his own firm with Nomura's backing in 2002. Terra Firma's other investments include the German rest-stop chain Autobahn Tank & Rast.