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Heavy Job Cuts Expected at EMI

emi jobsLast year, private equity firm Terra Firma acquired struggling number four music label EMI for about $6.4b (including debt).  A few days ago, an internal email from Terra Firma’s CEO Guy Hands leaked.  It hinted at major house cleaning. 

Ahead of Tuesday’s EMI staff meetings, early reports on the wire services and from the Wall Street Journal are citing insiders that those changes may include job cuts for  as much as one third of EMI’s six thousand person global staff. 

Even as sources suggest the cuts may be smaller, the number of jobs lost is expected to be substantial.

All of the major music labels have struggled with declining CD sales and the difficulties of adjusting their businesses to the digital decade.  Of all of the Big 4 (Sony BMG, Universal, Warner Music and EMI), EMI has, by some accounts, faces the gravest financial difficulty.

The majority of the job cuts are expected to come from EMI’s recording division and not their publishing related organization.   From the leaked email, EMI’s new leadership wants to consolidate and streamline some service components. They also want to focus on addressing the digital market, becoming more in tune with the customer’s and find better (and more comprehensive) ways to serve the needs of their artist clientèle.  In an environment where there traditional label services for marketing and promotion are less essential than in the past, EMI wants to make sure their artists receive enough value to remain loyal and under contract.

There are whispers EMI plans to put greater emphasis on discovering new talent and may let go of some older acts.  There is also gossip that the layoffs may come by way of internal label consolidations.  (EMI did something similar last year when they merged their Capital Records and Virgin Records imprints).

A third less prominent rumor is the “new” EMI has ambitions for a modified model built around a greater vertical integration of artist and consumer services.  This would be something akin to the strategy being implemented by concert promoter Live Nation. (Live Nation is branching out from concert promotions and adding recording services, fan club support, publishing and, by 2009, in house ticketing services).

EMI’s job cuts aren’t likely to be small but they may be no more substantial (as a percentage of total staff) than those that occurred when Edgar Bronfman Jr.’s investor group acquired and privatized Warner Music.  (In March 2004, Bronfman Jr. announced that their Warner "turn around" plan included laying off about 20 percent of staff and combining some label services).

Officially, EMI so far remains quiet on strategy and layoff plans.  The silence isn’t likely to last much longer.

Update:Details of the restructuring have started to emerge. Terra Firma says they are hoping to cut costs by as much as $392m per year. The starting point will be the job cuts which will number between 1,500 and 2,000. Approximately 1/3 of the cuts will likely effect UK operations.


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