Terra Firma to cut 2000 EMI jobs

The UK buyout firm has signaled its intentions in a £200 million a year cost-cutting exercise. Terra Firma limited partners are taking up £200 million of co-investment rights in EMI backing the turnaround.

Terra Firma has begun its overhaul of EMI’s recorded music division with planned job cuts of between 1500 to 2000 and a £200 million ($392.6 million; €263.4 million) a year cost reduction drive, according to a statement.

Guy Hands:
Shaking up

The buyout firm’s founder said at a meeting in a London cinema he planned to reposition EMI’s labels to ensure they are focussed on A&R or scouting and artistic development, while sales, marketing manufacturing and distribution at the company will be brought into a single division. Guy Hands’ firm is also attempting to eliminate significant duplications at the group to reduce waste.

Hands said in the statement the changes would ensure “this iconic company will be creating wonderful music in a way that is profitable and sustainable.”

Hands told UK newspaper Financial Times 85 percent of artists at the company lose money and £70 million a year is spent subsidising 15 percent of artists that would never produce an album.

The group has exceeded marketing budgets by about £60 million a year and wastes £25 million a year scrapping unsold CDs, Hands said. Seventy percent of the company’s profits come from the recorded music business, which handles the company’s glittering back catalogue.

Investors in Terra Firma funds are taking a circa £200 million equity stake in UK music business EMI, the firm’s spokesman told PEO. This will lead to Terra Firma decreasing its equity stake in the business from £1.5 billion to £1.3 billion.

Some of the most famous stars at the record label have left the company since Terra Firma acquired it, including alternative rock band Radiohead and ex-Beatles musician Paul McCartney. The manager of pop star Robbie Williams has also expressed discontent with the buyout firm’s handling of its staff.