EMI In Talks To Outsource U.S. Operations
November 3, 2008 at 12:36 PM (PT)
EMI is considering turning over its distribution, sales and marketing operations in the UNITED STATES to a rival in an attempt to cut its extensive losses, reports CNN MONEY. Three industry sources told FORTUNE that the storied BRITISH company is talking to WARNER MUSIC (WMG), SONYBMG (SME) AND UNIVERSAL MUSIC GROUP about assuming these functions in the U.S. Those companies declined to comment.
EMI also declined to comment on its reported talks with rivals about outsourcing. However, a source familiar with the industry said all EMI wanted to do in the U.S. was outsource its CD distribution to retailers like WAL-MART and BEST BUY.
Sources close to the talks say EMI could save as much as $300 million a year if it completely outsourced its American marketing and distribution operation.
EMI was purchased in AUGUST 2007 for $6.4 billion by GUY HANDS' TERRA FIRMA, a British private equity firm. Since then, it has gone through layoffs and management turnover as the new owners struggle with upheaval in the music industry.
GEORGE VAN HORN, a senior analyst at IBISWORLD, said the idea that EMI might outsource its sales and marketing in this country wasn't as surprising as it might sound. "It's fairly drastic from a historical standpoint," he says. "Looking out at the future, it probably isn't that drastic. That's an indication of how severe the cutbacks have to be [at EMI] to get into the position of being profitable on the business activities you do keep."