Music giant EMI Group has restructured its EMI Music operation by splitting the company into two core businesses: EMI Recorded Music, which will be run by Ken Berry, and EMI Music Publishing, which will continue to be headed by Martin Bandier.
The restructuring follows the firings Friday of EMI-Capitol chairman and CEO Charles Koppelman and exec veep-G.M. Terri Santisi, whose positions and managerial layer were eliminated in a cost-cutting move.
Sources suggested Tuesday that Koppelman will get an exit package worth around $50 million, which includes stock and options, as well as severance.
He also had more than four years to go on his lucrative employment contract, which was renegotiated less than six months ago.
To ensure a smooth transition, Berry, a well-respected, but mostly unassuming exec — the antithesis of Koppelman — spent Tuesday meeting with West Coast label chiefs, filling them in on his and EMI Music prexy-CEO Jim Fifield’s vision for EMI and espousing a lean-and-mean approach for the future. Berry will head to New York today to meet with execs there.
Berry’s chats mirrored much of Fifield’s internal memo that was faxed to label chiefs and execs Tuesday morning.
Eye on cooperation
“As our business has become more global in scope, it is increasingly important that we achieve a level of cooperation and coordination among our labels,” Fifield said in the memo. “Ken’s promotion is aimed at furthering that objective so that we are on the best possible footing to continue to grow our business into the next century.”
Fifield, to whom Berry and Bandier will report, said Berry’s “initial focus will be on strengthening our North American business, which is critical to our ability to compete in the world market.”
The company said it will close some of its New York offices and move its North American headquarters, which had been ensconced at the Carnegie Towers, to L.A.
As many as 35 staffers in New York were pinkslipped Tuesday, with at least 90 more being phased out over the next six months.
More reductions also are expected in the future and redundant functions at the corporate level will be absorbed by the individual labels.
Music pulls through
Despite the disappointing returns in the U.S., EMI Music nonetheless reported strong revenues of £380 million ($620 million) for the fiscal year ended March 31, and an 11% increase in its dividend.
“I am pleased to report that, despite slow growth in most of our major markets and the failure of much U.S.-based repertoire to generate significant international volumes, both EMI and HMV performed very well,” said Colin Southgate, chairman and CEO of EMI Group.
The group’s pre-tax profit before exceptionals (charge-offs or write downs) was up 3.6% over last year on sales of $5.26 billion. The figures were calculated at actual exchange rates, and are dampened by the strength of the British pound.
When calculated at a constant exchange rate, the group’s pre-tax profit was up 11.7% to £410.1 million on sales of $5.84 billion, up 1.8%.
Operating profit for EMI Music rose 10.4% to $657.4 million on sales of $4.33 billion.
The closures and shift to L.A. will result in a $190 million write-off, which will result in a $64 million annual reduction in operating costs.
HMV operating profit rose 28.1% at a constant rate to $40.9 million on sales of $1.43 billion, up 13.9%.
EMI was broken out from the consumer electronics group Thorn in August.