Music Giant EMI Axes Artists, 1,500 Jobs
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Music Giant EMI Axes Artists, 1,500 Jobs
Wed Mar 31, 2004 05:38 AM ET
By Adam Pasick, UK media correspondent
LONDON (Reuters) - Music giant EMI will cut 1,500 jobs, drop one fifth of
its recording artists and outsource most of its CD and DVD manufacturing to
reduce costs, the British company said on Wednesday.
The sweeping measures at the world's third largest music company -- home to
the Rolling Stones, Coldplay and Norah Jones -- come amid continued strife
in the recording industry, beset by piracy and declining music sales.
EMI also said recorded music sales in the year to end-March 2004 held close
to the previous year's levels. Its shares were up 7.0 percent at 275 pence
by 1022 GMT.
Investec analyst Kingsley Wilson said EMI's outsourcing of its manufacturing
in Europe and the United States was "long awaited" and the company's nearly
flat annual sales represented "a significant outperformance of the market."
EMI forecast savings of at least 50 million pounds ($92 million) a year from
the cost-cutting plan.
The music industry's woes have been blamed on numerous problems from illegal
music downloads, to competition from video games and other entertainment,
and a dearth of hot new musical genres.
'NICHE' ARTISTS TO GO
"The time is right to further reposition EMI Music. Exiting manufacturing in
our two primary regions of Europe and the US will allow us to lower our
costs while flexibly meeting our supply needs," said EMI Music's Chairman
Alain Levy.
"We believe that by concentrating our efforts on a tightened roster of
artists we will increase our revenue-generating potential while reducing our
costs."
Niche and under-performing artists would go, EMI said, but it refused to
give names.
The culling of its artist roster could cause EMI to drop in the ranks of the
world's largest music companies. In 2002, the last year for which sales
figures are available, third-ranked EMI had a 12.0 percent market share,
followed by Warner Music with 11.9 percent and BMG with 11.1 percent.
The dropped artists represent "a low single digit percentage" of EMI's total
music volume, the company said.
THE COST OF DOWNSIZING
The company said it would take a cash charge of 75 million pounds and a
non-cash charge of around 80 million, tied to writedowns and its downsized
artists roster, in 2003/2004.
EMI's Higher Octave and Narada labels will be merged, as well as its
Christian music labels Sparrow and Forefront.
In transferring its Dutch CD and DVD plant to local manufacturer
MediaMotion, it netted only a nominal sales fee but received considerations
in MediaMotion's agreement to supply CDs and DVDs. EMI's U.S. manufacturing
plant in Jacksonville, Illinois, will be closed.
In recent years EMI has seen two merger attempts blocked by regulators, one
with Warner Music and one with Bertelsmann's music arm BMG. Last year it
bowed out of the race for Time Warner Inc.'s music business.
"The plan at EMI is to be a standalone business and this would be the right
thing to do to produce the best possible performance," said one senior
banking source.
"But that's not to say that they have to remain independent, if someone came
along with an attractive transaction," the banking source continued.
EMI also announced it had acquired the remaining 20 percent of Berry Gordy's
Jobete song catalog, which includes Motown classics such as "I Heard It
Through the Grapevine," for about $80 million.
(Additional reporting by Siobhan Kennedy, Sudip Kar-Gupta and Janet McBride)
($1=.5502 Pound)