GUY’S BEST MEMO YET

Dear All,

I am writing to you today, as we are announcing the first steps towards achieving our goal of becoming the world’s most innovative, artist friendly and consumer focused music company, by reshaping and streamlining the structure of EMI’s recorded music division.

After in-depth research and hundreds of discussions with artists, managers, industry insiders and business partners, we have concluded that dramatic and immediate change is warranted. You yourselves have been strong advocates for change, in the many letters and emails I have received from around the globe.

Constructive change must be built on principles and we have been guided by three of them:

• We believe in our artists for the long term.

• We will respect and collaborate with them

• We must establish a true partnership with our artists and their advisors, based on openness, trust and honesty

As you are aware, the current economic model at EMI is unsustainable. We have analysed recorded music in detail and while some areas are profitable, the business as a whole is not. This type of analysis is something we have done across hundreds of businesses, and in the case of EMI the conclusions show that change is necessary.

Therefore, we have to change our organisational structure and the ways in which we do business. Some of the organisational changes will come immediately and other parts will be implemented in stages in order to protect existing projects. However, by summer the revised organisation will be in place.

To explain these structural changes to you more clearly, please find attached, a document showing the new global functional organization. As you will see, the changes to the global company can be explained as follows:

• Repositioning EMI’s labels to ensure they will be completely focused on our artists and A&R, maximising the potential of all our artists.
• Developing a new partnership with artists, based on transparency and trust, and helping all artists monetise the value of their music by opening new income streams.
• Bringing together all the group’s key support activities including sales, marketing manufacturing and distribution into a single division with a unified global leadership.
• The elimination of significant duplications within the group to simplify processes and reduce waste.

This structure is designed to serve your artists needs, to allow EMI to tailor services to you and your artist’s specific requirements, and to enable EMI to be a sustainable and growing enterprise. In simplified terms, the new divisions will be as follows:

Labels / A&R putting the artist first

Music Services delivering music products and services for today’s consumer

Support Services achieving operational excellence

The change in the organisation cannot be accomplished without considerable pain. Eliminating duplication and bureaucracy, and reducing cost will necessitate substantial staff reductions. Sadly, between 1500 and 2000 jobs will have to go. While these reductions will be undertaken with great care and fairness, we may have to remove an individual or two who has been helpful to your artist, or, you.

EMI currently has 14425 artists on its roster, and in the last year, we tried to break 1300 globally. This is clearly unsustainable; we need to focus on those artists for whom we have both the time and expertise to support properly and with whom we can be successful. The roster is too large and the number of album releases are too many, to apply proper focus or expertise.

As of today, I cannot tell you the future size of the reduction in EMI’s roster. We are going through a systematic process of categorising artists signed to EMI:

1) Those currently profitable, which is currently only about 3%.

2) Those we believe can be profitable, which we clearly hope is as large as possible.

3) Those whom will never be profitable, no matter how we change the model.

Sorting out the roster and finding solutions for artists who cannot be profitable under any model, is of great importance. We believe there are alternative models outside of the profit model required by EMI to support these artists, such as local and corporate sponsors and angels.

I want to assure you that our artists and our staff are at the centre of our planning and we are using all our energy, determination and focus to create a stronger, healthier EMI. I have enormous respect for EMI and our artists. EMI is an iconic brand with a rich history and we want to ensure that the creation of music by the incredible talent signed to this label, continues for generations to come. This will only be possible, if the recorded music division becomes a sustainable business.

Once you have reflected on our plans, please, reach out to Caryn Tomlinson, so she can quickly direct your questions or issues to the appropriate member of the Music Management Board. She is contactable on email via [email protected] or on + 44 (0) 20 7795 7525.

I believe that, with your help, we can turn EMI into the most creative, most expert and most profitable company in the world. We will give this Company the success that its famous name, our artists and our staff deserve. That is my commitment.

With best wishes,

GUY HANDS