Hands full of unwanted CDs

In the excitement surrounding EMI's troubles last week, we'd missed Guy Hands' interview with the FT. In particular, this nugget:

The record business - in which 85 per cent of artists are lossmaking and EMI pays £25m a year to scrap unsold CDs - "is stuck with a model designed for a world that has gone", he says.

EMI spends more ditching its unwanted product as the entire Croatia economy makes.

And yet, at the same time, still makes a handsome profit.

Hands insists this can't go on:

"Can you imagine what would happen if most consumer industries overshipped by 20 per cent? Can you imagine any consumer industry having 10 per cent of employees as middle management? Can you imagine only 6 per cent of staff in production?"

Well, no, but then can you imagine if Heinz was dependent on hitting an emotional chord to sell its baked beans? Or if Ford suddenly discovered that the Escort had decided to adopt a new direction, leaving it with a financial commitment to deliver the Escort Rudebox to dealerships up and down the land?

Hands' answer is to use focus groups. No, really:

His solution is to switch from pushing CDs at consumers to pulling them to-wards music. One element will be focus groups. "People say the industry is more creative and the customer doesn't know, only the creatives do. When you look at which car companies are succeeding, it's the ones which work with customers," he argues.

Maybe. Maybe, if you're making cars, and discover that people want cars which allow them to transport kittens easily, you can respond to that sort of desire. But focus groups would never tell you that there would be a (brief, but lucrative) market for The Darkness. A focus group would never encourage investment in a long, steady niche like The Wedding Present. Would a focus group respond well to "how would you feel about a group of cartoon characters singing a song about Clint Eastwood?"

Even focusing on the dull stuff that EMI churns out on a day-to-day basis, it's a safe bet that the focus groups as Take That fell apart would have led to a massive investment in Mark Owen, the sexy, happy one, and steering clear of Robbie Williams. However happy that might have made us, it would have cost EMI a small fortune.

And if the company is to bend to the dictates of volunteers asked questions by men with flipcharts, how does that allow the company to build a relationship with an artist? If they strike a long-term, six album deal, what happens if the focus groups turn sour on an act after the second album proves too difficult? But if the label retains the flexibility to tell an act to piss off after each release, what's to stop said act using EMI to fund and promote the career kickstart and then heading off to earn more with Starbucks or LiveNation or under their own steam?

When it's suggested he doesn't really know what he's doing and that he's brought a lemon, he points to his success - aircraft leasing and train rolling stock. He's less keen to mention his other excursions into fields which rely on guessing the public tastes upfront: Le Meridien was write-off; Threshers barely increased in value over the seven years he held it.

And is he really the man to help EMI cope with a new consumer market? After all, Hands was the man who helped to create BoxClever - a televsion rental company. In 2000. Does someone who thought that the idea of people renting their TVs had a future in the 21st century really understand the new media world enough to take a hostile ship like EMI safely to port?
[Thanks to Michael M for the link]