Carnage at EMI as 1,800 jobs are cut in dramatic shake-up

Internal links

Outlook:

Hopes high for music industry veteran's turnaround powers

EMI, Britain's largest music group, is to cut 1,800 jobs and halve its dividend as it seeks to improve the efficiency of its operations and put more money behind fresh talent.

The struggling company, which features artists such as Radiohead, The Rolling Stones and Coldplay on its roster, said the cuts would cost £240m in the year to 31 March. This includes the £38m paid to Mariah Carey to sever the group's contract with the singer after the failure of her Glitter album.

EMI would not disclose how many of the job cuts would come in the UK, where EMI employs 1,500 staff including 300 at its London head office. However, 192 jobs will go in Swindon where EMI is closing a CD manufacturing plant. Half of the 1,800 jobs have already gone, the company said. The cuts represent 20 per cent of EMI's worldwide workforce.

The changes are the result of an overhaul by Alain Levy, the new head of EMI's recorded music division. He was brought in last October by the chairman, Eric Nicoli, to revive a business which has been hit by two profits warnings in six months as it struggles with a bloated cost structure and an artist roster over-reliant on stars whose best years are behind them.

He said there should be fewer fat bonuses and more emphasis on new talent. "The industry has not been generating enough superstars. The talent is there but the industry has lost sight of the time and money required to build stars."

Mr Levy has dropped 400 artists, about a quarter of EMI's total. "We had 49 artists in Finland which I think was just a few too many," he said.

The "non-creative" divisions of EMI's record labels, such as marketing, sales and IT, are being merged to cut costs.

The EMI label will be rebranded as Capitol to create two worldwide labels, Capitol and Virgin, though EMI will remain the name of the umbrella group. Virgin will move to New York.

Mr Levy said the cuts would create £100m of annual efficiency gains. He announced bullish financial targets including an aim of improving EMI's worldwide market share by 0.5 to 1.5 percentage points. Another one was to improve operating margins to between 11 and 15 per cent within three years.

Mr Levy wants EMI to "take bands early" and make them successful worldwide. He pointed to the group's success in breaking Kylie Minogue in the United States, where her new album Fever has sold 115,000 copies in its first week of release. He said the group would no longer give artists huge advances, though analysts said the group would be forced to compete for top talent that otherwise would sign for rivals.

Mr Levy said the group would employ more A&R staff in the US, where the group has performed poorly. Robbie Williams, one of EMI's biggest stars, is out of contract and is said to be frustrated by EMI's inability to break him in America.

The annual dividend has been halved to 8p a share with further cuts not ruled out. "Looking forward the board will consider the level of dividend in the light of progress within the business," the company said.

EMI is considering the sale of its stake in HMV Media, which includes the Waterstone's book stores. It is raising a further £120m via property sales.

The £240m write-offs will push EMI into a £90m loss for the full year as pre-exceptional profits will be about £150m.

The changes were welcomed in the City where EMI shares rose 10p to 356p. One analyst said: "They need to restore profit and at first glance this is what we needed to see. Longer term they need to drive sales, especially in the US."

Another said: "It's hard to see the growth strategy. They need to find new artists and this is a much harder step."