News

EMI Group PLC has gotten serious about surviving in a depressed market. In the wake of a disastrous multimillion-dollar payout to pop singer Mariah Carey, the UK music label has announced sweeping cutbacks in its workforce—including many American executives—and in its roster of artists.

On Wednesday, March 20, EMI's chief of recorded music, Alain Levy, revealed a plan to cut 1800 jobs, approximately 20% of its workforce. Sources say 27% of the jobs lost will be in North America. The company will also reduce stock dividends by 50%.

EMI will cut around 400 performing artists from its 1600-act roster. Levy did not reveal which artists would be dropped, but he did admit that many of them weren't selling well and hadn't been selling well for a long time. He mentioned that EMI—home to Pink Floyd, the Beatles, and Garth Brooks—had relied too heavily on older established acts without developing new ones. "There has been an inability to generate enough superstars, artists who consistently sell more than 10 million albums," Levy told reporters. "This industry has been living as though there's no problem at all, and there are big problems . . . So something's got to give."

He also announced plans to take a $211 million (€240 million, or £148.6 million) restructuring writedown for the fiscal year ending March 31, in addition to a $33.45 million (€38 million, or £22.9 million) charge related to the Carey debacle. Last year, EMI signed the temperamental pop diva to a much-publicized $80 million multiyear contract, giving her $20 million up front and pumping $10 million into production and promotion of the soundtrack to her movie Glitter. Both the film and the album died on the vine; EMI then bought its way out of the contract rather than watch the entire $80 million vanish.

Levy has a reputation as a no-nonsense manager. The former head of PolyGram NV was brought in to EMI last October to turn around the ailing music giant; he reportedly receives a salary of only about $1 million annually, miniscule by US chief executive standards. Levy had particularly harsh words for what he called the "massive, massive salaries" of US record promotion executives, many of whom make as much or more than he does. "I'm willing to pay people if they prove their contribution . . . but not the other way around," he stated. Cutting the deadwood from EMI's executive ranks will account for almost half of the company's projected annual savings, according to the March 21 edition of the Wall Street Journal.

Levy projects that his efforts will boost EMI's operating margins by as much as 13% within the next three years. On the 20th, news of the cost-cutting moves pushed EMI shares up 2% in late-afternoon trading on the London Exchange. EMI is the first of the music industry's "Big Five" to initiate an organization-wide overhaul. Of the five—which include Sony Music, BMG, and Warner Music Group—only Universal Music managed to report profits for 2001.