Tuesday, November 13, 2007

EMI plans: stage three - profit

We're half-impressed by Terra Firma's steering of EMI; it's still getting a lot wrong, but does at least seem to have accepted that things can't go on like there was no internet.

However, the long-term prospects for the company still don't look all that rosy. TF is seeking other partners to share the risk - a common move in the private equity world - and, in order to tempt them, is circulating half-business plans. One has (apparently) wound up in the hands of the New York Post.

They pledge that they're going to be making loads of money by 2012:

Terra Firma plans on increasing cash flow at its recorded music unit from $43 million to $1.1 billion in 2012

Blimey, that sounds like a lot. How will it do that?

Well, like the Tories, they're pledging to cut costs without actually being sure if the costs are cutable:
Terra Firma thinks it can cut another $223 million in fixed costs at EMI

This is cutting everything, across the board. So how will the record label function?
The firm also wants to reduce costs in artist-and-repertoire and marketing by $58 million by using social networks and user-generated Web sites like MySpace to discover and promote talent.

[The NYP fails to mention that it shares a parent company with MySpace.]

It's a nice idea, but what TF doesn't apparently reveal is why artists would choose to go with EMI if they're able to market themselves online without the company's help. It's a little bit like Marks and Spencer promising to cut its costs by sourcing its food from soup kitchens. Terra Firma needs to do more work on what it is that EMI intends to offer the artists it finds on MySpace; presumably, having dismantled its distribution network and cut its A&R department to save money, it's not going to be the size of its operation. So, what would an eEMI have, exactly?


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