Ship’s Biscuit — Flipping the digital landscape to portrait.

EMI is sacking over 2000 people in an attempt to streamline operations since it was purchased by Terra Firma Capital Partners in May 2007. Heading up the action is Guy Hands, far from being your average record industry exec, Hands is a workaholic banker with dyslexia who made a few quid (about 200 million) with a chain of pubs and is best mates with William Hague. Not exactly the knight in shining armour that the recording industry might be expecting but planned cull of nearly a third of EMI staff might not be the action of a ruthless bean-counter but that of a strategic genius. EMI is a hugely inefficient organization due in part to the fact that it has largely grown through acquisition. Buying up label after label has meant that offices are spread throughout the world, each with their own processes and workflows. And with over 5,500 staff there are certainly inefficiencies to be addressed. The most interesting of Hands’ plans is that he is looking to pour millions into A&R, millions which will come from cuts in his marketing budget, stripping it down from 20% of income to just 12%.

Now, I have a theory about what he’s planning, bear with me on this one (and it is only a theory). A&R people (Artists & Repertoire) are basically scouts who go to gigs and discover the next big thing. They then groom and develop them into something that’s marketable which they can make money out of. By shifting resources out of feeding their top acts such as Kylie, Coldplay and Robbie Williams, he can move money further down the pecking order where, presumably, it will go further.

First of all, for anyone not familiar with The Long Tail, in recent years, increased choice has the added effect of also increasing consumption. This is a debatable point but if you accept that if EMI were to change the structure of their offering to focus on more small artists, could they weather the storm? So instead of giving new artists £250k to record an album, taking the money back off them when they start selling, they do the same thing but on a much much smaller scale, much more frequently. In addition to this they could even create a delivery network that delivers music very fast very cheaply to the consumers. The interface for this would probably look just like iTunes, it may even smell like iTunes but it would be a fraction of the cost. Nobody would steal a Robbie Williams album that takes 2 days to download from Limewire if they could get it instantly for a fraction of the cost of iTunes; convenience wins every time. That’s why you pay through the nose for your milk and bread if you get it from the local corner shop or ‘convenience’ store.

So, at this stage, what does EMI NOT have? Well, despite the fact that they have a roster of a couple of thousand fully-developed bands, this simple isn’t enough currently. These days we have access to millions of tunes, EMI needs to sign everything and anything that has even the slightest chance of being purchased by consumers. For the artists they can offer marketing dollars, general label donkey-work, help plugging their tunes, getting gigs and generally a whole world of music expertise. EMI effectively switches from hit-making to niche-making, feeding the music consumers ferocious appetite, bolstering the smaller acts, spending a fraction on the hit makers.

The only other thing that doesn’t really add up in my speculation is the fact that Hands is planning to fire artists that don’t ‘pull their weight’. Personally, I think it’s just a bit of new-boss rhetoric to throw off the competition.

This is certainly quite a shake up, but time will tell if it’s what the record industry needs. But with a 98% success rate in all of the deals he has made in the last 15 years, my money’s in this guy’s hands. In fact, the only deal he hasn’t made money on was blighted by two terrorist attacks in the US.

Incidentally, Robbie Williams is going on strike until he’s promised a decent marketing budget. At Ship’s Biscuit, we’re supporting his efforts 100%.