EMI IS APPROACHING A CROSSROADS, SAYS I.B. BAD

During EMI’s first full year under Guy Hands, the company lost a staggering $1.2 billion, leading to speculation in Fortune that Hands is in talks with the other three major music groups in hopes of selling off its distribution unit.

Early this year, it was hoped that a massive hit from Coldplay would be enough to turn the company around, but as it turned out, neither the wildly successful Coldplay project nor the unanticipated breakthrough of Katy Perry have provided the money-hemorrhaging company with the tourniquet it so desperately needs.

There’s no question that EMI’s deteriorating situation demands radical reshuffling, and the concept of outsourcing distribution—a move that would save the company an estimated $300 million—represents the logical next step toward Hands’ vision of a leaner, more efficient operation, the key to EMI’s survival.

While the idea actually predates the Hands regime by several years, the dire situation in which he now finds himself renders this scenario one of a severely limited set of options. But will that be enough, considering the depth and breadth of the company’s problems?

Some believe Hands is seriously considering getting out of the U.S. altogether, choosing instead to enter into a licensing deal with another member of what would then effectively become the Big Three. Others see this scenario as far-fetched in the sense that no label can become more successful by abandoning the world's biggest market. In any case, as bad as things have been in the past at the long-beleaguered company, the situation may well get worse.