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Music Industry Fallout Continues

January 15, 2008

exercisesynapse.jpgEMI is the first giant to come to blows with the reality of the established music industry, expecting to cut it’s workforce of 5500, mostly in the U.S. and Europe, by a third as part of restructuring. Citigroup loaned EMI Guy Hands 2 billion pounds to buy the music giant just as the recent credit crunch began. In an internal structuring move, Hands gave Roger Ames, the head of EMI in North America the added responsibilities of the UK and Europe as the UK executive left. EMI is taking a close look at a nonexecutive chairman as part of continued cost-cutting measures and restructuring. The EMI chief is putting more focus of digital music and imposing stricter rules on artist signings. Music companies sign artists to recorded music contracts that entitle them to payment whenever and wherever the music is used. EMI is seeking multiple rights, allowing EMI to profit from all aspects of promotion including T-shirt sales and seeks to take a share of tour and merchandising revenues as well. The industry and the music press are fearful of repercussions in bad press and anger from currently signed artists. Meanwhile, Hands is seeking to sell off the company pension fund to create additional operating capital and to reduce risk and responsibility. As money grows tighter the music giants must face the realities of business in a declining market during a credit crunch. EMI is making adjustments and working smarter internally. You can see that in order to sign new artists or established ones, such as recently signed Iron Maiden, more rights are being secured in order to firmly secure profit margins in the business. The result is that artists will enjoy less of what they earn and are less likely to break even as the music industry raids territory that used to belong to the recording artists. Ultimately, this creates an adversarial relationship with the talent that music giants need the most as they continue to tighten the thumbscrews on the bread and butter of the music industry. The music industry continues to sell off less profitable divisions and diversify risk as the money supply tightens. This is also a grand time for music giants that are more financially well-healed to snatch up ownership and power in segments of the music industry. Even in a declining industry, the opportunities are immense. Opportunities in the newer world of digital music are now the focus as control and exploitation of that talent is explored by the established industry and the newbies in the digital market.

Elvis Manning

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