Guy Hands has been working hard to reengineer EMI. Terra Firma bought EMI in August of ’07. Since then they’ve suffered a number of public disappointments, not the least of which being Radiohead’s departure from EMI for their latest release “In Rainbows”.

This week marks a new low for the Terra Firma team. First there was the announcement of a restructuring process that will cut between 1,500 and 2,000 jobs. Next, Barney Wragg resigned from the head of EMI’s digital division. Then another public break – the Rolling Stones will release their upcoming “Shine a Light” with Universal Music.

Cutting unproductive units may generally be a smart move. Hands has decided to reduce risk by focusing on publishing rights acquisition and management.

I wonder how they’ll maintain the market insight needed to preserve margins. Artist development may not be a self-supporting unit, but it may have been EMI’s best means to stay in touch with the market. Will EMI invest in key relationships to preserve their competitiveness moving forward?

UPDATE: Jim Fusili at WSJ makes a pivotal error by assuming that EMI’s stated commitment to A&R will benefit “music lovers”. Fusili asserts that EMI’s “silo mentality” leads to the unnecessary segmentation of consumers.

This would be true if EMI were in the business of directly interacting with consumers. They’re not. The music industry relies heavily on distribution partners and most importantly, retailers. Glenn at Coolfer also points out some benefits of “silos”.

Retailers use segmentation and classification to help customers find what they’re looking for. Distributors, ad agencies, publicists, booking agents, old media outlets, and new ones alike use segmentation to deliver an attractive product. Segmentation is useful and desireable in a world where so many different dialects are spoken.

Many hip hop fans love classical music, and vice versa, yet they don’t want to have to dig through the Lil Mama to find their Liszt.

Label execs generally won’t pretend to have the same talents of a successful local record shop manager. Similarly, financiers shouldn’t pretend to have the same talents of an A&R rep.

[tags]Guy Hands, Terra Firma, EMI[/tags]