EMI faces restricted budgets and job cuts

By Andrew EdgecliffeJohnson in London and Joshua Chaffin,in New York

Published: December 31 2007 02:00 | Last updated: December 31 2007 02:00

EMI's new private equity owners are enforcing tight restrictions on new artist signings and marketing budgets in an attempt to impose stricter discipline in the traditionally profligate music industry.

The moves are likely to be followed by job losses among the UK music group's 5,500-strong workforce later in 2008.

People who have been briefed on Terra Firma's plans expect the axe to fall more heavily on the overlapping marketing and administrative bureaucracies of individual labels than on creative "A&R" talent scouts. The cost clampdown is essential for Terra Firma to meet the ambitious targets it set when it completed its takeover of EMI in August for £4bn ($7.9bn) including debt.

Tightening credit markets have made other parts of the plan, such as securitising EMI's publishing business, unlikely - at least in the short term.

The new approach could trigger further unrest among artists and their managers in the new year, when the private equity group led by Guy Hands is due to announce details of his plan for the struggling music company to staff.

A person close to Terra Firma said it had made three significant culture changes at EMI: telling employees to submit business plans and secure senior executives' approval before signing up new artists; demanding detailed marketing plans before any promotional activity; and changing bonus plans to encourage executives to focus on EMI artists' global potential rather than local markets alone.

Mr Hands is also understood to have carried out an unprecedented survey of 600 employees since buying the business, and issued staff before Christmas with an iPod-shaped book of quotes from the feedback he received in an effort to stimulate debate within EMI.

Terra Firma, which is targeting £28m in marketing savings by 2012, has instructed executives to shift their focus from television advertising to bettertargeted promotions that emphasise digital music.

The new plans could affect releases due out in the next few months. One industry analyst warned: "Artists' managers could say, 'If you can't spend the money to be competitive in the marketplace I won't give you my record'."

However, the person close to Terra Firma said the new approach would benefit artists, many of whom share the cost of publicity. EMI Music's regional heads have also told staff to be more selective about new signings, saying they must first send a written justification to Tony Wadsworth in the UK, Roger Ames in North America, or Jean-Francois Cecillon in Europe. Although EMI had similar policies, they are understood to have been widely ignored.