More bad news for the Label business.

TERRA FIRMA, the parent company of EMI MUSIC GROUP, which in turn owns labels such as Virgin Records and Capitol Records, announced major restructuring plans for the next six months on this mornings webcast. CEO Guy Hands has set up EMI/NA under President Roger Ames with separate heads for their foreign divisions saying, “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 … make EMI’s music more valuable for the company and its artists alike.” Specific changes announced for the label group include:

  • Repositioning EMIs labels to ensure they will be completely focused 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 groups 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.

What does this mean to artists, the field staff, and radio?

The first to feel the affect from EMI’s cutbacks will be staff. At least 25% of employees will be terminated, according to the Los Angeles Times. You can expect lower-level marketing/sales, promotion, and support personnel to be the first to go.

Next, the artists will feel a hit. EMI plans to almost completely eliminate the cash advances used to sign and retain artists to their roster. Instead, EMI will pay retroactive compensation based on how well music sells. In some ways, this seems pretty obvious — turn out a good product and be fairly compensated for it. However, with today’s climate of pirated downloads, good music usually finds a way to consumers without necessarily being purchased. Artists have numerous other ways to earn their living: publishing, touring, merchandising, endorsements, etc. The advance fees typically paid to sign artists usually gets spent on tour support, production, marketing, and promotion — all the ways used to generate sales for the label and artist to recoup.

However, when you look at some of the outrageous advance fees paid to some artists ($150-million advance for Robbie Williams in 2002), they may very well be out of hand. But, without these guaranteed advances, EMI will be at a loss to sign and retain major artists when competing with Universal, Sony BMG, or WEA. As explained to the LA Times by one source, “You’re not competitive anymore for A-list talent. You’re asking to be outbid … Striking deals with smaller bands that sell fewer albums could be more practical today, at a time when well-established bands are less dependent on the marketing muscle of a major label.”

If you’re signed to EMI, your real concern now is how much support you’ll have behind your next project to get in front of consumers and generate those sales you need to reach the point where you start actually making money. After all, we know marketing and promotion budgets don’t stand a chance in this cost-cutting environment.

Artist meetings are scheduled for next week to ease those fears. Good luck with that, EMI.

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Trackbacks/Pingbacks

  1. UPDATE: First major artist jumps from EMI. « Radio’s Situation Room - January 16, 2008

    […] UPDATE: First major artist jumps from EMI. Posted on January 16, 2008 by Scott Sands Here’s an update to an earlier post about EMI MUSIC GROUP’s latest “restructuring” under owner TERRA FIRMA. You can read that post here. […]

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