EMI Records to be scrapped as profits slump

The struggling music group EMI announced yesterday it was scrapping one of its record labels to cut costs after a disastrous year.

The EMI Records label will be ditched, and all its artists, including Robbie Williams, Kylie Minogue and Geri Halliwell, will move to one of the two remaining brands, Virgin and Capitol.

The latest move comes two days after it announced its second profits warning in six months, and after it paid £19m to Mariah Carey to end her contract. Carey, once the world's biggest-selling artist, had a £70m deal, but a nervous breakdown and attempted suicide drew more attention than her latest album release.

EMI's new head of recorded music, Alain Levy, has been forced to look for cutbacks after a dearth of hits, piracy and a downturn in album sales. The company will reduce the number of managers as part of the cost-cutting exercise.

Music groups have been under pressure to slash costs and restructure after one of the industry's worst years.

Last month EMI overhauled its US management, bringing in the trusted executive David Munns to run the group's operations in the world's biggest music market, where EMI has seen business slip.

EMI bought Virgin Records from Richard Branson in 1992, expanding its US market share and propelling the group into the ranks of the top music companies. Los Angeles-based Capitol has been a core part of EMI since 1955. Mr Levy has been trawling through the sprawling group for cost savings and restructuring, and is due to deliver the findings of a strategic review next month. In Tuesday's profit warning, EMI said 2001 pre-tax profits would be some £150m compared to market expectations of £160m.

Despite its current problems, EMI has still earned its place in music history by signing the Beatles to its Parlophone label after they were turned down by Decca. Much of its success in the 1960s was due to the band.

In 1967, the Beatles signed a nine-year contract with EMI Records before setting up their own label, Apple.

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EMI Records also saw off stiff competition to sign the Sex Pistols in 1976 for a £40,000 advance but within months the company dropped the band because of adverse publicity, most notably the notorious television appearance with Bill Grundy on an early-evening programme on ITV.

* The wooden stage on which a teenage Paul McCartney first encountered John Lennon in 1957 – and had the cheek to tell him his guitar was out of tune – has been saved from demolition.

The stage at St Peter's Church Hall in Woolton, Liverpool, was due to be ripped up by building contractors this week. But the council has reached an agreement with the church to put the stage in storage at an undisclosed location while talks are held to re-locate it permanently in the city.