Hands in £200m bid to get EMI on song

Hands accused the music industry of "burying the creative process in bureaucracy" and pledged to move away from a reliance on CD sales from a huge roster of artists, many of them loss-making.

He also defended the £3.2 billion acquisition of EMI by his Terra Firma private-equity group just before the credit crunch took hold, saying: "Terra Firma's history has always been that, when the market thinks we overpaid the most, we make our most money."

The shake-up at EMI has sparked anger among staff and artists, with Robbie Williams on strike and awardwinning band Coldplay thinking about ditching the record label. Radiohead has already quit.

Hands said the company must face some tough decisions if it is to survive. He even said Radiohead "had the right idea" in leaving EMI.

"They understand their fans," he said. "What Radiohead showed the industry was that it isn't one answer for all artists, or indeed for every customer."

He is close to raising £200 million of new equity to inject into EMI, the largest co-investment round Terra Firma has ever raised, allowing it to invest in artists and repertoire (A&R) and honour deals with its bankers. Hands is expected to slash between 1500 and 2000 jobs from the EMI Music division at a staff meeting in Kensington tomorrow.

The company has 19 managers, marketing executives and lawyers for every talent scout, and Hands now plans to expand the A&R talent-scout team while cutting back middle managers and other staff.

He has also hinted that the roster of 14,000 artists could be slashed, as just 200 of them made most of its revenues last year and 85% lost money.

He said: "The industry is based still on the phenomenon of the 1990s and the CD. It is based on the belief that if you have hits, you'll make sufficient money to cover everything else.

"It's based on the belief if you have conglomerates of labels, they can benefit from economies of scale through manufacturing and distribution sufficiently to make enough money.

"It is based on the belief that individuals who know a particular type of music in a multicultural and multi-demographic society can push a product to the consumer.

"All three of those, in my view, are complete fallacies."

Hands plans to switch from pushing CDs to bringing in customers through other methods, including focus groups, which will help the industry "to work with the customer and not force-feed them".

Rival record group Chrysalis today warned that the Hollywood writers' strike is likely to hit music companies' income from their works used in film and television. It added that there was a lack of new releases in its first half but it has high hopes for the second half of the year with works from Gnarls Barkley, Feeder and The Raconteurs.