CHANGE FROM THE OUTSIDE IN:
I.B. BAD ON GUY HANDS’ PLAN

Guy Hands’ global restructuring of EMI’s recorded-music operations marks the latest example of a non-music executive trying to rewire the industry—an undertaking that experienced music executives have thus far been unable to accomplish.

On the surface, Hands' broad strokes seem reasonable: put the focus squarely on A&R, make A&R and marketing independent of each other, open new income streams, eliminate redundancies in a consolidated back-office division serving the entire company and reduce costs by as much as $400 million annually. Below the surface, however, significant questions arise.

Hands’ statements suggest that he grasps the central role of locating and developing talent, but if this is the case, why would he jettison Tony Wadsworth, one of the most celebrated A&R executives of the modern era, and the man responsible for the signings of Radiohead and Coldplay, on the very eve of Hands’ A&R-focused announcement? Does the sacking of Wadsworth bespeak a lack of understanding on Hands’ part about the nature of the creative relationships between artists and labels? Or has Hands decided to go with Roger Ames instead of Wadsworth because of the former’s more extensive global experience?

Ames, the company’s lone remaining industry-savvy U.K. executive, reportedly got off to a bad start with Hands and didn’t appear to be part of the incoming boss’ initial plans, but those issues seem to have been resolved, at least for the moment, with Ames serving as President of North America and the U.K., though that has yet to be formally announced.

But will the veteran’s role change in the new world order, does he have a new deal in place and if so, why hasn’t it been disclosed? Indeed, why were no executives mentioned by name in the announcement? And who will Hands choose to serve as the company’s CEO?

In terms of other structural changes, who will be named global head of marketing, and will he or she come from outside the music business, as most believe? If this is the case, will the worldwide marketing head be surrounded by qualified music-marketing executives globally and in the U.S.? Will promotion executives globally and in the U.S. report to their respective heads of marketing? And where do artist development and touring fit, under marketing or A&R? In the past, most successful models have had an A&R specialist at the top of the hierarchy, with marketing under him. Hands has opted to discard the traditional model, having obviously concluded that it no longer works.

Which brings us to Jason Flom. What role will this experienced, highly regarded executive be given? The logical move would seem to be putting him in charge of U.S. A&R and marketing, but that, too, remains to be seen. Numerous additional questions surround the impact of the new plan on EMI’s U.S. operations. Who will head marketing, and who will head promotion? Additionally, didn’t U.S. operations go through the needed consolidation at the label level last year, when Capitol and Virgin were combined into the Capitol Music Group under Flom? Speaking of creative types, where does Billy Mann fit in, and who will report to him?

The next big question is, following the next contraction of EMI’s workforce, will sufficient staff remain to keep the company functional? In a worst-case scenario, 2,000 of the 4,500 people who remain in the company's recorded-music sector worldwide will be eliminated in the second round of major cutbacks since January of 2007, and staff already appears to be stretched precariously thin. After the bloodletting is completed, will there be enough staff left to cover even the basic functions, or will label offices be ghost towns in which a handful of functionaries sit at their computers compiling metadata from iTunes and Amazon while a few “talent scouts” scour MySpace in search of the next big thing?

The announcement of the restructuring was preceded by a seemingly cavalier remark from EMI’s chief, who confided to the Financial Times, “I often visualize the record industry as generals throwing CDs at the public, with their troops behind them.” Neither that aside nor the announcement that followed could have possibly done anything to alleviate the distress of the 20-odd managers who have united as the “Black Hand Gang,” meaning the possibility of a wholesale mutiny by EMI acts remains a distinct possibility.

Thus far, Hands’ most vocal critic has been Tim Clark, who manages Robbie Williams. The most damaging defection, though, would obviously be that of Coldplay, the company’s best-selling act, whose manager, Dave Holmes, has made no secret of his concern about the decision-making of the Hands regime and its potentially diminished ability to market the band’s recently completed and desperately needed third album.

If Holmes and Coldplay refuse to deliver the album, or worse, demand a buyout, the company would take a hit from which it would be difficult to recover. In this regard, does Ames have Hands’ ear to the degree that he can reason with the new boss, dissuade Holmes from acting on his threat and thus minimize the damage? Or will Ames, too, be let go once his perceived short-term usefulness is exhausted? Anything is possible with this wild card, who has yet to demonstrate that he has either a grasp on the old, broken business model or a rational plan to fix it.