EMI ousts two top executives
After a slow holiday season and years of on-again, off-again merger talks with one of its largest competitors, struggling music giant EMI Group confirmed Friday that it had sacked two top executives.
The departure of EMI Music Chief Executive Alain Levy and Vice Chairman David Munns was announced with the disclosure that the London-based company planned to revise its fiscal outlook. Both moves come on the heels of a disappointing year for the world’s third-largest music company, which failed to crack the top 10 albums in sales in the U.S. for 2006.
EMI’s problems reflect long-standing troubles in the music industry, which has been pummeled by piracy and a lack of big-selling albums. Last week’s No. 1 album, the soundtrack to the film “Dreamgirls,” sold only 66,000 copies -- the lowest tally for a top seller since Nielsen SoundScan started tracking sales in 1991. And total album sales -- including digital -- slipped nearly 5% in 2006 from the previous year, despite a doubling of digital albums sold.
As a result, analysts predict that EMI’s internal moves alone won’t fix the company’s problems.
“It’s like rearranging deck chairs on the Titanic,” said Aram Sinnreich, managing partner at Radar Research, a Los Angeles media consulting firm. “There’s a much larger problem in that the economic and distribution model for major labels today is fundamentally broken.”
EMI is especially weak in the U.S., where its market share shrank to 10.2% from 10.4% over one year, according to Nielsen SoundScan.
“They’ve had a lot of albums go bust and haven’t had any major chart appearances for a while,” Sinnreich said.
Highly anticipated releases such at the Beatles’ “Love” album, Janet Jackson’s “20 Y.O.” and Robbie Williams’ “Rudebox” did not meet expectations, analysts said. EMI’s flirtations with New York-based Warner Music Group also have yet to produce a deal.
Still, the departure of Levy and Munns, two longtime music insiders, surprised the industry. Levy, who has been chief executive and chairman of EMI Music since October 2001, is credited with previously transforming PolyGram Records into a leading record company before it became part of Universal Music Group. Munns, who worked at PolyGram under Levy, has also co-managed the rock band Bon Jovi.
The restructuring places Eric Nicoli as chief executive of EMI Group and responsible for management of EMI Music, the company said. Nicoli, who had been executive chairman of EMI Group since 1999, spent much of his professional life outside of the music industry with British food maker United Biscuits.
Major shake-ups in the management of record labels often unsettle artists.
“If the people in charge of your dollars believe in your act, it’s a good thing,” said Everclear singer Art Alexakis, who worked with three label heads at EMI’s Capitol Records before finally leaving. “If they don’t care, it’s a bad thing.”
Some analysts who cover EMI’s performance on the London Stock Exchange expressed concern that Nicoli’s lack of experience in music made him the wrong man for the job, according to Reuters.
The management changes “underscore the weakness in the global music landscape as well as EMI’s acute troubles growing its U.S. business,” said Richard Greenfield, a media analyst at Pali Research in New York.
Observers said that EMI was an industry leader in making the switch to digital downloads but that the transition from CD sales had been rough for all the major labels. Digital growth means that companies are dealing with a new set of intermediaries, including executives at Apple Inc. and Microsoft Corp., said Mike McGuire, a media analyst at research firm Gartner Inc.
EMI also announced consolidations Friday that it said would save the company $214.1 million annually. Because of the management and structural changes, the company said, revenue could decline 6% to 10%.
Many observers think that EMI could be better off if it merged with Warner Music Group. EMI offered to acquire Warner last summer, but Warner rejected the bid as too low. Warner then made a bid for EMI, which was in turn rebuffed.
Levy’s refusal to accept Warner’s bid, and EMI’s subsequent poor performance, could have been a factor in his termination, said Laura Martin, senior media analyst at Soleil/Media Metrics.
“The solution to EMI’s problems is to merge with Warner,” Martin said. “The departure of Levy clears the way.”
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