EMI ditches 2,000 staff . . . and one cheeky chappy threatens to strike

When Terra Firma, a private equity firm, assumed control of the EMI label last year, accountants had to reach for the smelling salts as they went through the company's books, writes Brian Boyd.

Private equity firms and rock'n'roll don't really mix at the best of times and, when it comes to budgets and bottom lines, the situation can get inflammatory.

Terra Firma's accountants soon came to learn that, in the music industry, appearance and image are everything. Hence their disgust when it was revealed that EMI paid bands hefty advances that might never be recouped, and that artists were lavished with gifts and probably indulged right down to the last brown M&M.

Terra Firma called for "fundamental change" in how the label was run. There was talk of standing up to artists, cutting down their advances and penalising them if they were late in delivering albums. "Some artists unfortunately focus on negotiating for the maximum advance - and this advance is often never repaid," they said in their preliminary report.

It was actually quite tragic for Terra Firma to believe that negotiating for the highest advance with possibly no intention of paying it back is a bad thing for a rock group to do. But the musicians really got mad when the equity firm revealed how much EMI spent annually on "fruit and flowers" (£200,000). Terra Firma apparently had no idea what fruit and flowers actually means in the world of rock'n'roll. Let's just say they're not items you get receipts for.

Just prior to Terra Firma's arrival, EMI had lost Paul McCartney and Radiohead. The only two really big-hitters left are Robbie Williams and Coldplay. Williams has now said that he is considering "going on strike" (by not delivering his new album) as a protest at how the label is being run. He has compared Terra Firma's management of EMI with "plantation owners".

Says Robbie's latest manager, Tim Clark: "Given where EMI were, the state they were in, the changes they were making, how could any artist deliver an album? We wouldn't know how it would be marketed, distributed and promoted. They're decimating staff [2,000 layoffs were announced this week], and it would be wilfully irresponsible of any manager to say, 'Let's deliver this album; they'll sort it out'. We have to be persuaded that the services that they offer to their artists are going to be of the highest quality."

Coldplay have also expressed their "confusion" about what direction EMI is taking. The band are due to release a new album (Prospekt) later this year, but recent comments from manager David Holmes, in which he said,

"I am not really sure what EMI is right now", have thrown their plans into doubt.

Coldplay were very perturbed by last week's departure of Tony Wadsworth, EMI's UK chairman, who was widely viewed by the artists as a "music man" rather than a "number cruncher".

"It's a concern when somebody of Tony Wadsworth's standing and ability leaves," says Holmes. "He has been a great supporter of artists and it is a problem that he's left, a problem for many of those artists he's had a hand in signing directly or whom he's supported strongly over time. So, yes, a lot of people are very upset over his departure. Tony was the reason a lot of bands signed to EMI. Artists want to work with music people, not finance guys."

The Starbucks label (home of McCartney) is eyeing up Williams. And Coldplay are taking a look at the Radiohead model of releasing albums.

EMI is one of the great music labels, with a venerated history and a real commitment to quality music over the sort of ringtone fodder now clogging up the charts. It would be hard to watch it bottom-lined out of business by a private equity firm that doesn't even know what "fruit and flowers" means.