According to the WSJ Terra Firma will announce today that EMI will shed up to a third of its staff. Though EMI have the unique catalyst of VC ownership, this illustrates as point Iíve made a few times before in this blog i.e. that the declining revenues of the 21st century are a realignment process rather than a dip in fortunes and the industry will need to cut its cloth accordingly.
The music industry is becoming a smaller beast than the halcyon days of the 90ís and business models and strategies will have to focus on preparing labels for being competitive in this new environment. This process will impact the industry across all aspects of the business and digital will be a key asset for implementing the change. For example not all artists will warrant the risk of full album deals, so many will increasingly be offered digital only agreements that will focus on more immediate, bite size release deliverables with the option to expand dependent on performance. But it is also likely that tiers of artists will emerge, with some only ever suited to digital.
EMI is not about to die. Nor is the music industry. But both are mid way through a difficult transition process. European music revenues will pick up again (modestly) in 2010 due to digital spending, but even by 2012 total revenues will only be where they are now i.e. at their all time low. Terra Firma will be hoping this will make EMI better placed to compete in that smaller market.