On Why You Shouldn't Download Music

1,500 Job Cuts Expected at EMI.

by ERIC PFANNER

NY Times January 15, 2008

LONDON — Terra Firma, the private equity firm that recently acquired the music company EMI Group, plans to announce a reorganization Tuesday, including the elimination of close to a third of EMI’s staff, according to people briefed on the plans.

Terra Firma plans to dismiss more than 1,500 employees, out of about 5,500, as it moves to streamline marketing operations at EMI and focus on the discovery of new artists.

The cuts have unnerved managers of artists signed to EMI, including Robbie Williams and the Verve, who fear that support for their works will falter.

EMI, which Terra Firma acquired last year for £3.2 billion, or $6.4 billion, is perhaps the most troubled of the major record companies, which include the Universal Music Group, Sony BMG and the Warner Music Group, all of which are suffering from a continuing steep decline in sales of compact discs. EMI’s share of album sales in the United States fell to 9.4 percent last year from 10.2 percent a year earlier, according to Music & Copyright, a research service.

EMI and Terra Firma declined to comment. But a person briefed on the plans said reports of up to 2,000 job cuts were “probably a little bit on the high end of the range,” saying 1,500 was more likely. In any case, that would still represent a big share of employment at EMI Music, the recording division, which was expected to bear the brunt of the cuts. EMI’s music publishing unit, which has performed well, is expected to be affected less.

People briefed on the plans said EMI might shut down some of its record labels and some marketing might be consolidated.

The cuts would be the second overhaul for EMI in the last year. In January 2007, the company merged its two main American labels, Capitol Records and Virgin Records.

Still, industry analysts say more wrenching changes may have been delayed at EMI as the company spent the last few years in dead-end discussions with a rival, Warner Music, over a possible merger.

Job cuts are a common consequence of private equity takeovers; what is unusual, analysts say, is that Terra Firma has taken several months to detail its plans. When private investors led by Edgar Bronfman Jr. acquired Warner Music in 2003, they announced a reorganization plan, including job cuts, almost immediately.

Now Warner, with a slightly larger global market share of recorded music — 13.8 percent in 2006, to EMI’s 12.8 percent — has a smaller staff than EMI, having reduced workers to 4,000.