Music giant EMI today sounded the alarm on jobs and profits, after it announced sales from new releases had failed to live up to expectations.
EMI said annual sales in its recorded music division – home to Lily Allen, Norah Jones and Robbie Williams – were likely to be up to 10% lower after the “strong” release schedule envisaged for Christmas disappointed.
As well as warning that profits would be lower than expected, EMI said it would embark on a major restructuring as it looks to take out layers of management and get in shape to boost profitability.
Alain Levy, who has been chairman and chief executive of EMI Music since 2001, bore the brunt of today’s news, as he left the business with immediate effect.
EMI shares were 7% lower today as investors expressed disappointment at the update.
The company said it had been caught by weak market conditions, particularly over the Christmas period.
Revenues fell 5.2% in the six months to September 30, but EMI said in November that it believed it had a strong release schedule in the second half of the year, with album releases from Robbie Williams, Norah Jones and Keith Urban.
It said today: “EMI Music’s second half performance to date, in terms of revenues and profits, has been below prior expectations.”
Simon Wallis, an analyst at stockbrokers Collins Stewart, said: “One year’s poor result does not mean that EMI Recorded Music is rotten and worthless. It is more a poor reflection on management’s ability to set an appropriate cost base for their business and manage their release schedule.”
EMI said it wanted £110m (€200m) of annual savings across the group, with the majority from the elimination of fixed costs. It did not provide further details but said the initiatives would have an impact on all regions in which EMI operates.
The company plans to de-layer the group’s management structure and look to allow a stronger focus on artist and songwriter development.
EMI also has a music publishing division, which until recently was the largest in the industry, and managed a catalogue of artists including Sting and James Blunt. It has been trading in line with expectations.