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February 29, 2008

Guy Hands versus musical rent-seekers

Guy Hands, the man whose Terra Firma private equity fund took over EMI Group last year, was brutally honest this week about whom he blames for the fact that his acquisition is not going exactly to plan: A&R men.

These mysterious characters (the acronym stands for “artists and repertoire”), who have been responsible for signing acts to music labels, have not been earning their money, and certainly not being held accountable for it, according to Mr Hands:

The power and the decision has sat with the A&R man, who is someone who gets up late in the day, listens to lots of music, goes to clubs, spends his time with artists and has a knack of knowing what would sell.

They were committing money with no sign off, no nothing.

What we are doing is taking the power away from the A&R guys and putting it with the suits - the guys who have to work out how to sell music. Trying to persuade 260 people to give up their power has been hard.

We had labels at EMI that were spending five times as much on marketing as their gross revenues. We told them you could stick a £50 note on the cover of a CD and have the same effect, and we also wouldn’t have to pay them. Those sorts of comments don’t go down too well.

We’re getting there - a little slower than I would like, but I’m always impatient.

My instinctive sympathy lies with Mr Hands on this issue. He has taken a lot of stick from EMI bands such as Radiohead about not understanding the creative spirit and being a financier who is only interested in money.

But the reality of the industry is that both bands and A&R men (people, perhaps, although most of the top A&R names are men) are hardly uninterested in money themselves. Indeed, the A&R profession is accustomed to earning spectacular sums of cash for leading, as Mr Hands points out, a very nice life.

Given the straits of the industry, it seems fair enough to question whether they have the special powers that they claim, or whether they are simply rent-seekers who have inserted themselves between bands and investors and soaked up a lot of money.

This seems to me one of the most interesting issues facing the industry. You could mount a good argument that the internet and digital distribution has undermined the rationale for the bloated A&R overhead. When new artists can be discovered on MySpace, it surely brings into question whether quite so many highly paid talent-spotters are necessary.

Highly-paid A&R people tend to proliferate in the industry because the big labels are made up of many smaller ones, each with their own infrastructure. I remember being struck years ago by a Vanity Fair article that detailed how many millions some A&R men were raking in.

We shall see whether Mr Hands wins this fight, or whether the A&R fraternity manage to use the bands to discredit the suits, the tactic they have employed thus far. 

One Response to “Guy Hands versus musical rent-seekers”

Comments

  1. As music industry person it is going to be very interesting to watch how guy hands reshapes EMI. Many would agree that the expenditure whether it be in scented candles or marketing budgets that EMI employees have spent to excess.

    However returning control to the suits is an interesting approach considering the very suited a booted ex employee Ken Berry who I believe left EMI with a £25 million golden handshake. And as many know his wife Nancy Berry was very fond of scented candles.

    Bouyed by the financial wind fall that CD’s created, the misc industry made a huge mistake in the mid 90’s by entering the world of FMCG, selling albums in supermarkets and spending excessively on TV advertising. While adopting the marketing spend and retail outlets of FMCG brands they missed a crucial point, you make profits from FMCG good by providing a good product and managing a long life span e.g. Ariel, Persil.

    If Guy Hands wants a successful EMI he should talk to the people that create the wealth, the bands, songwriters, band managers and industry innovators and free thinkers. He needs to innovate as well as control budgets. After all bar doging taxes who really has come across a creative accountant.

    And go buy the a&r department a beer after all they bring you your new product to sell.

    Only time will tell.

    Posted by: Paul | March 18th, 2008 at 6:09 pm | Report this comment

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