EMI Cuts Confirmed

EMI today confirmed the rumoured news that it is to shed up to a third of its staff as part of wide ranging cost saving measures. As I have said here before, the process EMI is going through now is certainly more severe than the other majors but it is not, and will not be, unique. 2007 was the worst year that the European music industry ever experienced, with revenues declining by over ten percent. Spending has fallen year on year since 2002 with the rate of decline increasing in all but one year. When the decline finally halts in 2010 the European music industry will be 40 percent smaller than it was in 2001. Thus the entire music industry is going to need to adjust to be suitably positioned for doing business in the contracted market place of the early 21st century. Digital strategies will become an increasingly important part of the mix, generating 2 billion Euros in Europe in 2012, but even then CDs will still account for the majority of revenues. (Clients see this report for more details, press see this release for more details). Thus the record labels have to continue to figure out how to make the little shiny disc make money for them for some time yet.

Other strategic points that were confirmed today include new relationships with artists, new digital initiatives, the consolidation of sub labels and the engagement of brands. Another issue Terra Firma are reported to be considering is streamlining the artist roster to focus on profitable acts. It will be interesting to see whether Terra Firma will apply business assumptions about giving time to nurture an investment and of different investments requiring more time than others to come to fruition. Not all artists are first time hits. Some donít find their creative zenith until their 3rd album or beyond. The apparent threat of big EMI artists such as Robbie Williams, Coldplay and the Verve to withhold albums in protest at the perceived focus on profits over creative direction illustrate just how unsettling the change is across EMI. However, it may yet prove to be the case that Terra Firmaís approach to identifying profitable investments may pay dividends among EMIís artist roster.