With Terra Firma trying to gather cash from investors in order to retain control of EMI, the company is now eyeing more cost-cutting measures. A plan is reportedly being drawn up that will include more staff cuts at EMI and dramatic growth in the company's digital operations. The cost reduction efforts, likely to be overseen by new finance director Shane Naughton, will amount to cuts of tens of millions of pounds in the division's cost base, according to the U.K.'s Telegraph. The cuts will center on investment in new systems and a drive to rid the business of duplication, and most of the reduction is likely to come from outsourcing and organizational changes.
The revenue plans involve building up sales at EMI Music Services, the merchandising and licensing arm that was set up last year, as well as growing digital music sales so that they account for 75 percent of total music sales within five years. The whole game plan is expected to be finalized in the next six weeks.
"We will present a compelling new five-year business plan with particular focus on the coming year," stated EMI Music CEO Elio Leoni-Sceti, according to the Telegraph. "It will involve both an acceleration in revenues coming from product innovation at EMI Music Services and some cost reductions from the introduction of new systems and technology and the elimination of some duplication. This will confirm our vision to evolve into a digitally-led music company. We have a strong business which is on the right track and that is our best guarantee of our future."
EMI will need to come up with quite an attractive plan in order to convince Terra Firma investors to inject new funds into the company so that the private equity group doesn't default on its loans from Citigroup. As reported last week, Terra Firma is considering asking investors for more than £100 million ($160 million) to cover its shortfall. EMI’s results have been improving since Terra Firma bought it in 2007, but even so, the company still had a net loss of $1.6 billion during the fiscal year, and it still isn’t generating enough cash to cover its debt. In the last 17 months, Terra Firma has breached loan covenants on its EMI debt five times and has had to inject nearly $150 million into the ailing company to stave off default.
