EMI Slashes Jobs, Artists Amid Slump

In a broad reorganization, music giant EMI Group on Wednesday slashed about 1,500 employees from its global workforce, began exiting the CD manufacturing business in the U.S. and Europe and laid plans to drop a slew of acts in the face of an industrywide sales slump.

The restructuring, in which about 20% of EMI’s recorded-music employees will be let go, is expected to deliver annual savings of about $92 million, the company said Wednesday. It comes just two years after EMI’s last major scale-back, when it cut about 1,800 employees and an estimated 400 artists.

EMI record division chief Alain Levy, who was brought in to revive that operation in 2001, said the job eliminations were necessary in a market that has been squeezed by piracy and sky-high costs.

“These additional steps will more closely align us with the evolution we are seeing in our markets,” Levy said. “We believe that by concentrating our efforts on a tightened roster of artists we will increase our revenue-generating potential while reducing our costs.”

EMI said about $46 million of the cost cuts would be reflected in the results for its just-ended fiscal year, which will be reported May 24. EMI Chairman Eric Nicoli said the London-based company had generated sales “close to last year’s level.”

The record division last year reported operating profit of $277 million on revenue of $3.3 billion.

The restructuring is expected to result in a one-time charge of about $138 million. EMI also said it expected to take a write-down of about $55 million tied to its departure from manufacturing in the U.S. and Europe. The shrinkage of the artist roster is expected to result in an additional noncash charge of $92 million.

The overhaul comes about four months after EMI, the world’s third-biggest record conglomerate, lost out in its bid to buy Warner Music Group, then a unit of Time Warner Inc. Instead, Time Warner sold the division to a private investment team led by Edgar Bronfman Jr.

EMI’s planned exit from CD manufacturing follows Time Warner’s decision last year to sell off its disc-making operation to Canadian firm Cinram International Inc., and underscores the upheaval rocking the industry’s internal economics.

Record companies once embraced the business of manufacturing plastic discs as a profit center. Labels also inserted provisions into contracts to charge artists for the companies’ costs in developing CD technology.

With sales declining, however, companies increasingly believe it is wiser to hire outside manufacturers large enough to make the discs for less.

EMI said about 900 of the 1,500 pink slips would be issued to employees of its manufacturing unit. In the U.S., it is shutting down a plant in Jacksonville, Ill., and entering into a disc production deal with Cinram.

Of the other 600 firings, about 400 are expected to affect EMI’s label operations in continental Europe, with the rest scattered around the globe, sources said. Emmanuel de Buretel, EMI’s top executive for continental Europe, has left the company.

In its U.S. label business, EMI is reducing the workforce by merging two Christian music labels, Sparrow and Forefront. New Age label Higher Octave is being folded into EMI’s Narada unit. Sources said EMI had made a handful of cuts at its biggest U.S. units, Hollywood-based Capitol Records and New York-based Virgin Records.

EMI said it would cut its worldwide artist roster by about 20%, probably resulting in the exit of hundreds of acts. Company executives declined to identify any specific acts.

Also Wednesday, EMI said it would complete its purchase from Motown founder Berry Gordy Jr. of the 15,000-song Jobete publishing catalog, home to scores of hits such as “My Girl” and “Let’s Get It On.” EMI, whose music publishing division is the world’s largest, will pay about $80 million for the 20% share of the catalog it didn’t already own.