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EMI's pain not necessarily music rivals' gain

LONDON (Reuters) - EMI lost two of its biggest acts in 2007, is in danger of losing more, has seen record sales slump and on Tuesday announced major layoffs.

British singer Robbie Williams performs at the MTV Latin America awards in Mexico City October 19, 2006. EMI lost two of its biggest acts in 2007, is in danger of losing more, has seen record sales slump and on Tuesday announced major layoffs. REUTERS/Tomas Bravo

But the label’s pain is not necessarily its rivals’ gain.

While some of EMI’s problems are home-grown - including a poor release schedule last year and doubts about its new management’s style - all four big record labels face tumbling sales at a time when stars have more choice than ever over how to market music.

“No one is rubbing their hands with glee,” said a seasoned executive at another major label. “EMI’s difficulties are not good for the industry. Everyone suffers.”

EMI said it would axe up to 2,000 jobs in a restructuring plan to save up to 200 million pounds ($392 million) a year. The announcement follows a drip feed of bad news in recent months.

Robbie Williams, who signed a deal in 2002 reported to be worth 80 million pounds ($157 million), said last week he would not record a new album in 2008 because he had no confidence in how EMI would market it.

Coldplay, another big British act, is considering its options after UK boss Tony Wadsworth left EMI this month, while Radiohead, who have left the label, said Terra Firma boss Guy Hands and colleagues were “like confused bulls in a china shop”.

Before Terra Firma took over last year, former Beatle Paul McCartney left EMI in March, branding staff “boring”. Personalities, it would seem, count in music.

“In the music business the product talks back,” said the executive, who asked not to be named.

But there has also been sympathy for Hands and EMI, and an acknowledgement that the way the business worked must change.

“I think we are the only industry in the world where we take 100 percent of the risk but only get maybe 40 percent of the potential revenue,” said Ged Doherty, UK head of label Sony BMG.

“So that is why that sort of adjustment in business models needs to go on,” he told Reuters, referring to companies seeking a share in touring and merchandise revenue as well as recording.

Hands gave a hint of how he would approach the industry when he explained his handling of another acquisition in the cinema business, where he found executives regularly jetting off to film premieres.

“They thought they were in the movie business, but actually they were in the popcorn business,” he said.


The artist exodus is also not exclusive to EMI, with Madonna parting ways with Warner Music Group in 2007.

And as well as a shrinking music marketplace, hit by online piracy and competition from other forms of entertainment, some of the world’s top acts are looking beyond the record labels.

“2007 was the year the artists took control,” said Ben Cardew, news editor at Music Week.

McCartney signed to Hear Music, a label set up by Starbucks coffee chain, while the Eagles sold “Long Road Out of Eden” in Wal-Mart stores in the United States.

Madonna, meanwhile, signed to concert touring company Live Nation in a deal estimated to be worth $120 million.

Artists are looking increasingly to touring and merchandise for revenue, prompting more “360-degree” contracts that cover all areas, not just recording and managing publishing rights.

Ironically, it was Williams and EMI who signed one of the early versions of the now popular model.

Prince gave away his new album for free with a British newspaper, to the consternation of Sony BMG which had a deal to distribute it, while Radiohead offered “In Rainbows” online on a “pay-what-you-want” basis.

Many industry insiders criticized the moves for devaluing music, but Prince and Radiohead benefited from huge publicity.

However, experts agree it is too soon to write off labels.

When a star leaves, the label usually keeps lucrative publishing rights to his or her back catalogue, and the likes of Universal Music Group, the world’s biggest label, distribute CDs globally for bands without a record company.

Recent headline-grabbing initiatives have also been mostly by established stars who enjoyed long relationships with labels.

“It is a case of horses for courses,” said Cardew. “Some artists want to be involved in how music is released, but people generally don’t get into bands to think about marketing models.”

Additional reporting by Michael Davidson, Kate Holton; Editing by David Cowell