Draft One Partners Conference 21.04.05

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I want to begin by saying Thank you. For the
past few months I have been intensively engaged
alongside my Terra Firma colleagues in the most
extensive listening exercise any business has
ever undertaken. Literally hundreds of
people from employees like you within EMI, from
the artist and manager communities, and from the
wider music industry have given generously of
their time to share their thinking with us.
Additionally, we have spoken to thousands of
consumers to understand why they are not paying
for recorded music today. You have given us
your thoughts on every aspect of working for this
great creative institution which is EMI. You
have set out clearly and cogently the
considerable challenges facing EMI side-by-side
with the rest of the music industry. Together
you have had a major impact on informing our
deliberations and shaping our forward thinking.
To everyone who contributed, I want to say
again Thank You.
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Over the last 7 years the recorded music
industry, rather than embracing consumers has
done a number of things which have alienated
them First, as an industry we pushed Napster out
of business Second we had the RIAA sue
individuals, literally thousands of them, for
uploading music illegally Third, we resisted the
release of DRM free music Fourth we did not make
music easily available for those who have to pay
The result is that new music loses money with
EMI not having produced a positive result from
new releases for over seven years The most
important thing we can do as an organisation and
as an industry is to stop fighting amongst
ourselves and to get consumers to pay No amount
of litigation and bullying can win only working
with the consumer can
Before talking about what we have learnt from
you, EMIs artists and the record industry
generally, I want to share with you any thoughts
on the music consumer At the end of all this
we have a consumer who, as Radiohead say, regard
not paying for music as a victimless crime
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I do too, and I am truly honoured to be involved
in an organisation that plays such a critical
part in all of our musical heritages from The
Beatles to Norah Jones from Simon Rattle to
Coldplay. Alongside that shared love of music,
almost everyone we engaged with held another
conviction that the whole recorded music
industry has to change, and that EMI has to
change with it too. Quite a lot of people
suggested that EMI could and should show the way.
We can, and we will.
However, this will not be without pain whenever
one tries to change anything that has been
established for a long time, even if people
support you, they are normally some way behind.
EMI is going to be out in front, even if being
in front and telling the truth inevitably results
in brickbats. But first, why the need for
change?
Now turning back to EMI, one message came through
loud and clear from every conversation we had.
It is a notion that unites and binds everyone in
this industry whether EMI people, or artists,
or our partners. Everyone shares a great
passion for, and love of, music.
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Overall revenues across the industry from the
sale of recorded music have been declining. But
the recorded music industry has neither responded
strategically to these challenges nor adjusted
its way of operating accordingly. Most of you
have told us, the old ways of doing business,
designed for a different era, have been protected
for too long. They are no longer appropriate if
we are to have a sustainable industry which can
find, nurture and break the creative musical
talent of tomorrow.
The irony is that whilst the sales of recorded
music have been dropping, music overall in all
of its forms has been flourishing and growing.

Well, as I have said to people I work with since
1995, a world that was once dominated by CDs and
record shops would give way to a far more complex
era of multiple routes to market, including
digital. Music is an integral part of
peoples everyday lives as never before.
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We need to create a company that is profitable
and growing, serving its artists and music lovers
more effectively than any other organisation. A
company with world-class skills and expertise in
every musical domain.
We need to harness these strengths, apply our
creativity to how we sell, market, distribute and
indeed finance our artists music.
The overall challenge for EMI, therefore, is to
move to an organisational structure which is best
able to monetise its artists music in a world
where the CD is not the only way in which
consumers enjoy their music and many consumers
have become used to not paying for it. There
are within EMI extraordinarily creative and
talented people and our artists count as some of
the most accomplished in the world.
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• We want to find and to back the best new talents
  across the genres. We want to continue to work
  with great music talent of every generation and
  to help make great music and I believe we can and
  we will and so do my investors who are some of
  the smartest. Indeed they have themselves put in
  additional 500m into this business. EMI
  Recorded Music is stronger today than it was a
  PLC.
• But
• we have to do that in much more innovative and
  economic ways as I said in my first staff
  meeting it is impossible to just cut for growth
  however we need to be fighting fit and we need a
  relationship with our consumers which is mutually
  beneficial
• we need a relationship with our artists based on
  a true partnership, in which we jointly share
  both the risks and the benefits
• we must be great partners, supporting our
  artists
• we will aspire to be best-in-class at optimising
  the sale of recorded music through every outlet
  both physical and digital
• we aim to help our artists generate additional
  revenues from the multiplicity of opportunities
  that exist beyond the sale of recorded music
• and we promise in due course to be the industry
  leader in producing financial information for our
  artists which is timely, transparent and
  accurate

In the past few months, we have analysed EMI in
a very detailed but simple way, focusing on the
money. Weve done what has been done in
thousands of industries before. Weve looked
at the cash received and cash spent and the
answers have been disturbing. Overall, new
releases, which have been seen as the lifeblood
of the industry have been losing money at EMI for
several years. Some of our new music is
profitable, but most is not, even before
overheads. Over time as the consumer moves more
to digital, unless more are willing to pay, all
will become unprofitable and in those
circumstances how will artists develop their
careers. We all know that you simply dont go
from a gig in the pub to the 02. Between the two
there is a lot of money, people, blood, sweat and
tears, We need to find new models to allow us
fully to monetise our artists work.
To achieve that vision, we have much to do, and
some of it will be challenging, but I believe
that EMI is up for it. Let me say first,
however, that EMI will remain right at the heart
of music creation.
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In reshaping the business, and reviewing our
relationships with artists, we have been guided
by three principles. First, we will believe in
our artists for the long term. Second, we need
to establish a true partnership, based on
alignment of interests in every area. And
finally we need to have a shared understanding
based on openness, trust and honesty. These
principles led us to the following conclusions.
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Unifying our UK and US AR structures under
common leadership is an important step in
allowing us to build and manage our rosters in an
integrated and holistic way. Of course, we need
to make sure that we have the right people with
the appropriate skills and experience. The
industry today requires people with a diverse
skillset, attuned to the demands of the consumer
and the market and with an understanding of how
the digital age affects the creation and
distribution of music.
Only 1 in 20 people in the labels actually do
AR the rest provide a range of services This
makes each label an expensive and inefficient
business in its own right. EMIs labels will be
focused in future just on AR, so they will be
able to concentrate on the creative process and
on developing partnerships with the artists.
We need to position the labels so that they are
focused absolutely on AR, which is what they are
trained to do and do best.
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One of the issues we will be addressing is the
sheer size of our roster. In the past, we have
followed the industry model of signing up as many
artists as possible, while taking huge bets on a
few. We actually have over 14,000 artists on
our roster. Once again, this is not sustainable.
We cannot provide meaningful support for that
number and everyone suffers as a result. Going
forward, we will have a smaller number of artists
on our roster, but we will aim to serve them much
better.
The role of these core functions indeed the
role of everyone not involved directly in AR
will be to monetise our music, ensuring that both
we and the artists extract the full value from
their work. We will develop and test new ways
of serving the customer in the digital age and
of exploiting the huge asset that defines EMI
music.
We will bring together the key support activities
under a unified global leadership. In this way,
we will coordinate the best talent delivering the
best results for our artists at a lower overall
cost.
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To achieve this objective we will have to respond
to the technical changes facing the industry.
For example, we are exploring new models of
both artist discovery and monetisation that will
enable relatively niche artists to remain
profitable in the new environment. In this
way, the new model will be built bottom-up around
the needs of the artist and the consumer without
the complexity that has built up within EMI and
the labels over the years. We can also use the
new technologies to give artists much quicker and
more accurate feedback on their chances of their
making it commercially.
The key organisational imperative is to free
people up so that they can focus on what really
matters to our artists and the economic prospects
of the company. The reshaped organisation is
designed to simplify what we do and remove much
of the noise in the system and in that way, help
us to release creativity and speed up decision
making. For example, we have already created
dedicated and integrated teams to support the
artists projects. And we will be exploring how
we can develop our relationships with the artists
to serve them in more ways than we do at present.
At the same time, we want as many artists as
possible to be able to develop their creativity
within the EMI family on a sensible economic
basis.
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• Digital technology has moved power for the
  organisation to the consumer. The consumer now
  has the power to choose we have moved from a
  push to a pull economy.
• One of the main tasks for the new marketing,
  sales and distribution functions will be to get
  inside the mind of the consumer.
• We need to listen to the consumer
• How do they want to discover new music?
• What would make them buy new music?
• How do they want it delivered?
• The new marketing function will be able to
  address these issues in depth as we have never
  done before.

Having really understood what the consumer wants,
we then need to deliver something companies in
the sector have not yet been able to do. We
will be testing and developing new models. In
particular, we will be looking at how we can more
effectively drive real value from our catalogue
and our archive underexploited assets in my
view and how we can access consumers directly.
EMI will be a profitable business, where
consumers get what they want and EMI helps them
find what they want where artists maximise their
earnings potential and realise their creative
aspirations and where employees use their
passion, expertise and knowledge to connect
artists and consumers.
We have great assets in this Company. We have
many talented, passionate people we have a
superb catalogue and a track record of
innovation. However, we havent driven enough
value from our music assets, and we dont have a
deep understanding of our consumers.
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• The reshaping of the company will focus our
  business activity into three key, and clearly
  defined streams.
• Labels/AR will, as I have said, be focused on
  putting the artist first.
• Music Services will deliver music products and
  services for todays consumer.
• - And Support Services will have the role of
  achieving the operational excellence necessary to
  help the other two streams achieve their business
  objectives.

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• We will not be asking people to reapply for their
  jobs in a formal way effectively you will all
  be evaluated as if you were.
• And I think its fair to indicate what we are
  looking for.
• The future EMI needs to have people with the
  right skill sets to do the job
• - highest of ethics
• - Dedication to achieving the best
• People with creativity and passion.
• There will be real personal accountability, with
  the opportunity to achieve and to be rewarded.
• There will be clear goal setting, accountability
  and a transparent review of performance, with
  achievement recognition. There will be a Long
  Term Incentive Plan that aligns the interests of
  all EMI staff with the interests of the company.
  It will be for ALL employees, not just senior
  managers. The intention is that every employee
  will share in the ownership of EMI.
• Those who can add real creative value will
  succeed in the new EMI.

There was no choice when we bought the company
- and this was recognised by the previous
management and all the other bidders the only
question was when. Over the few months we will
identifying job cuts in recorded music of between
1500 and 2000 people. We have to lower costs to
create a sustainable future for our company, our
artists and the music as currently, it is costing
too much to get our artists music to the
consumer. Restructurings are always painful -
and you all have indicated that you understand
that. Unfortunately in the past the
restructurings that have been done within EMI
have not been seen as fair. This time we are
determined to conduct the selection of who stays
with fairness, honesty and respect for everyone
as an individual.
Radical change of the kind and especially the
elimination of duplication means a substantial
reduction in jobs across the Company. Toget
her this group of people will create a lean,
lively and stimulating organisation, with a
strong creative and innovation culture.
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I have written to you today setting out the
technical information of the new structure and
your team leaders will be sharing with you more
details of what the reshaping of the organisation
might mean for each of you. I am confident that
together we will create a sustainable model for
EMI through working with our artists and by
understanding the consumer as a team, sharing
creativity, discipline and energy. We will give
this Company the success that its famous name,
its artists and you deserve. Thank you for all
your support. I look forward to your questions.