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EMI Music Co. to Cut Up to 2,000 Jobs

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JILL LAWLESS | January 15, 2008 03:39 PM EST | AP

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LONDON — Paul McCartney has gone on the run, Radiohead has fled and Coldplay is getting cold feet.

EMI, the storied home to The Beatles and The Rolling Stones that was taken over by a private equity firm last year, announced Tuesday it would cut about a third of the company's jobs in a restructuring plan aimed at reassuring its restless artists, countering plummeting CD revenue and saving 200 million pounds ($400 million) a year.

London-based EMI Group PLC said sales, marketing, manufacturing and distribution would be combined in a single global division as part of a "fundamental restructuring" of its recorded music unit. The changes will entail the loss of 1,500 to 2,000 jobs from the current work force of 5,500 over the next six months.

"We believe we have devised a new revolutionary structure for the group that will improve every area of the business," said Chairman Guy Hands, who led the 2.4 billion pound (then $4.9 billion) takeover of EMI last August.

EMI said the overhaul would allow its labels, which include Capitol and Virgin, to spot and sign new artists and better handle existing ones.

The company has a lucrative music publishing division that owns the rights to 1 million songs, and a roster of recording artists that includes the Beastie Boys, Norah Jones, the Spice Girls, the Rolling Stones and Kylie Minogue. But McCartney and Radiohead, two of its biggest acts, have left in the past year, while others _ including Coldplay _ have expressed unhappiness with the label.

In part, the artists' unease reflects an industry reeling from the long-term decline of CD sales and the rise of digital and online music distribution. Hands acknowledged that EMI, "like the rest of the music industry, has been struggling to respond to the challenges posed by a digital environment."

But industry experts say the other major labels _ the Sony Corp. and Bertelsmann AG joint venture Sony BMG Music Entertainment, Vivendi SA's Universal Music Group and Warner Music Group Corp. _ have weathered the storm better than EMI, which reported a net loss of 288.5 million pounds for the year ending March 31, 2007.

One problem is EMI's persistent weakness in the United States. Many of the label's big British acts, including Robbie Williams and Lily Allen, have failed to make a splash in the U.S.

"If you have got a company unable to break acts at all in the biggest market in the world, then you are going to be struggling," said Paul Williams, editor of Music Week magazine.

Musicians' discontent with EMI has grown since it was bought by Terra Firma Capital Partners, which snapped up the company when a deal with its recurrent suitor Warner Music Group fell through. Hands _ a financier with no music business background who made his fortune investing in everything from pubs to waste management _ has rebuffed suggestions that he overpaid, telling the Financial Times this week that Terra Firma was a "contrarian investor" with a history of proving its critics wrong.

But he won few friends among musicians by suggesting that he would drop artists who were not working hard enough. In a November memo to staff, Hands said that in the future the company would be "more selective in whom we choose to work with."

Radiohead ended its long-term contract with EMI in the fall, releasing its latest album, "In Rainbows," through the band's Web site. Guitarist Ed O'Brien told The Observer newspaper in an interview published last month that Terra Firma executives "don't understand the music industry."

Coldplay reportedly is considering leaving EMI after the band releases its fourth album later this year, and the manager of British star Robbie Williams said last week that Williams might not deliver his new album to the label.

"We have no idea how EMI will market and promote the album," manager Tim Clark was quoted as saying by The Times of London. "They do not have anyone in the digital sphere capable of doing the job required. All we know is they are going to decimate their staff."

EMI promised to focus more resources on A&R _ artists and repertoire, the company's talent-spotting division _ and to help artists "monetize the value of their work by opening new income streams such as enhanced digital services and corporate sponsorship arrangements."

Some analysts have suggested that EMI's turmoil reflects a permanent change in the industry, and that the digital revolution _ with its myriad ways of buying, selling and sharing music _ has made traditional record labels increasingly irrelevant.

McCartney left EMI last year after more than four decades, releasing his latest album, "Memory Almost Full," through Hear Music, the label backed by the Starbucks coffeehouse chain. Traditional labels, the former Beatle said in October, were "boring and jaded."

Also in October, Madonna left her longtime label at Warner and signed a $120 million recording and touring deal with concert promoter Live Nation Inc.

But Peter Ruppert, who runs music consulting group Entertainment Media Research, said record labels still had a future.

"There is a lot of talk about artists looking for a new approach, going on their own," Ruppert said. "That is great for artists that are established _ they have a completely new world in front of them. But that is not how you get there. There has to be a music company that takes care of you and helps you to get there."

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