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KAI RYSSDAL: It might not turn out to be a Happy New Year for employees at the record label EMI. There’s word today that the label’s new owners have decided to clamp down on costs. And job cuts are always in play when management starts talking that way. The private equity firm Terra Firma bought EMI back in September for close to $8 billion. Soon after that the company lost its best-known band, Radiohead. And its plans to make the company more productive have drawn fire from critics. Marketplace’s Amy Scott takes closer a look.
AMY SCOTT: In the New Year, Terra Firma chief Guy Hands will announce his plan for turning EMI around. The Financial Times reports today that a cultural shift is already underway. Music executives have long enjoyed great leeway in signing and promoting new artists. Now they’ll have to draw up business plans and get management approval. Music writer Michael Azerrad thinks it’s a great idea.
MICHAEL AZERRAD: Guy Hands wants to run a profitable business. And if that means changing some very dearly-held old conventions like lavish expense accounts, and signing artists willy-nilly and not really having a plan about how you’re going to promote them and things like that, well, you know, that’s all got to go.
But probably not without a fight. Hands recently ruffled feathers inside the company. He implied in a memo that the label’s artists weren’t pulling their weight. Aram Sinnreich is a partner at Radar Research. He says the cost-conscious Hands risks alienating both staff and talent.
ARAM SINNREICH: The potential upside, of course, is that by bringing costs down, that will allow EMI to be a more attractive target for acquisition or mergers in the future. But the potential downside is that they’re going to scare all of the artists and all of the major executive talent out of the company before they can do that.
EMI already lost its biggest name earlier this year. Radiohead reportedly wanted $10 million to sign a new contract. EMI offered $3 million, and Radiohead walked. It’s not yet clear who won that battle. The band released its latest album without the support of a traditional label. The CD comes out tomorrow.
In New York, I’m Amy Scott for Marketplace.
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