The EMI debacle: Can Guy Hands turn the music industry around?

Source: Exec Digital UK

Date :10/03/2008 14:42:56

The music business is going through a challenging time, fighting losses, internet downloads and dwindling revenues. Can Guy Hands, new owner of EMI, plot the way forward?

Written by Ruari McCallion

The pop music promoter/producer/impresario/guru Pete Waterman has been a bit quiet of late but that doesn’t mean he’s got nothing to say. Ask a question that hits the red button and he is very forthright indeed.

“We’ve had printing presses for the last few centuries but we haven’t had another William Shakespeare. Technology doesn’t give you talent,” he said. The reason for the explosion was my suggestion that, as I have Apple’s Garage Band on my computer, I – and anyone – can make records in my own studio and put it out on the Internet.

“If you make what people want to buy, they will buy it – it’s f*** all to with the technology. I don’t care what your technology is – it doesn’t say you can make hit records,” he said. “The Internet is fantastic, as far as I’m concerned, but it doesn’t make a song, it doesn’t make you a band and it doesn’t make you talented. All it does is get you an audience.” But didn’t the Arctic Monkeys and Lily Allen break out through YouTube and MySpace? “It’s a great story but I don’t believe it. I know the people behind them and they’re all marketing geniuses. They got the benefit of a great marketing gimmick and it’s gone now, it’s closed.”

The record industry probably needs a touch of business genius. It made fortunes in the 1970s and is dominated by UK and US companies. Now it’s now seriously struggling. The big names – including EMI – have been making huge losses. ‘Hard’ sales – CDs and the vehicles for delivery – are down; the physical product is the way they’re used to making money.

Last summer, private equity colossus Guy Hands paid £3.2 billion for EMI. At the time, many music industry insiders raised their eyebrows at the prospect of such a ruthlessly pragmatic business titan having the temerity to think he could run something as nuanced as a record label.

After appraising the operation, Hands announced that 2,000 jobs may need to go, along with a sizeable chunk of the senior management and artist roster. The reaction from the industry was one of horror, although those with any commercial nous reserved their shock for the appalling profligacy that Hands uncovered, including a £200,000 annual ‘fruits and flower’ fund for artists’ sex and drugs habits, a multi million pound property in Mayfair for senior executives and even a £20,000 tab for candles.

Lazy capitalism

“For the last two years everyone has done a good job of killing themselves,” Waterman said. “The market is flat, things have been overdone. I was at a meeting a few years ago and they were all embracing downloads, rushing into it – here is the future, put no constraints in, great thing for the customer…

Click here to read the full article on EMI