British newspapers say the state-of-the-company speech EMI's Guy Hands has planned for Tuesday will include jobs cuts, after all. A lot of job cuts: Hands is reportedly looking to axe 2,000 of EMI's 5,500 employees -- a 36% payroll reduction. Some details from the Telegraph:
Costs will also be taken out of marketing. Typically, record companies spend up to 20 per cent of projected sales on marketing, but EMI managers are understood to have been tasked with bringing that cost down to an average of 12 per cent.
By this summer the group aims to increase profits by £100m. Managers will make their bonus if group Ebitda (earnings before interest, tax, depreciation and amortisation) increases from last year's £150m to £250m. The bonus structure has been changed so that managers are no longer incentivised according to the performance of individual labels and CD sales but according to the group profit targets.
As difficult as the cuts will be for EMI's workforce, they're not a shock. Every EMI employee knew that they've been part of Hands' plans since his Terra Firma p.e. group bought the company last summer. And from an outsider's perspective, they seem rational given the state of big music. When EMI released its last quarterly earnings report in August, it disclosed that CD sales had dropped 20%, and those numbers could get worse over the next few years.