Radiohead quit, Robbie Williams on strike - and now 1,000 jobs cut

Artists lose patience with management at once iconic record label following private equity takeover

It was never going to be an easy relationship: hard-nosed City financiers and businessmen working alongside songwriters and musicians.

The men in suits reckon that working together they can revitalise EMI, the struggling group which has been a key part of the British pop industry for more than 40 years. It is the label behind the Beatles, Queen, Pink Floyd, David Bowie and more recently Radiohead, Coldplay, Kylie and Robbie Williams.

But just six months after Terra Firma, a private equity group, acquired the label for £3.2bn, the signs are not good: Radiohead have quit, describing the new regime as like "a confused bull in a china shop" and this week Williams has gone on strike, refusing to deliver his new album. Kylie and Coldplay are said to be considering their options and Tony Wadsworth, the man in charge of the UK arm, has been ousted after 25 years. Now it is understood that 1,000 EMI staff are to lose their jobs.

A look at 2007's biggest-selling albums puts EMI's woes in stark terms. The top 100 features a mere six from the label - and three are compilations of old material by Cliff Richard, Phil Collins and the Spice Girls. EMI's highest-placed album is only the 26th biggest seller of the year - Lily Allen's Alright, Still, which came out in 2006. Overall, 2007 saw EMI's share of the albums market fall 2.5 percentage points to 15.4%.

Williams's strike is more bad news. While Rudebox, released last Christmas, performed relatively poorly, his new album is being recorded with Guy Chambers, who co-wrote his biggest hits, and Mark Ronson, who produced much of Amy Winehouse's Back to Black, which was 2007's best-selling album.

Tim Clark, of IE Management, which represents Williams, said the singer would not release another EMI record until the management's plans became clearer. "We're led to believe there is going to be a new and wholesale cutback in staff. Tony Wadsworth has left, we understand other long-serving employees will be leaving too. We won't deliver an album to a company where we don't know what their structure will be or how they will handle things."

Next week Terra Firma is to say how it intends to turn EMI into a lean, mean music machine. Its plans focus on "efficiencies" - those job cuts. A source close to the private equity group said: "Workers need to spend more time servicing their artists and less time going to whizzy parties and travelling the world."

Terra Firma is run by Guy Hands, 48, a one-time bond trader who is not exactly rock and roll. William Hague was best man at his wedding.

Over his career he has acquired businesses ranging from pub companies to railway rolling stock leasing. He bought thousands of Ministry of Defence homes and controls the Odeon and UCI cinema chains. Since buying EMI - which he intends to turn around and sell for far more than he paid within about five years - he has called in several other traditional business executives with no music experience to help with the task. Post Office chairman Allan Leighton has become an adviser, as has former BBC director-general Lord Birt and former BAA airports boss Mike Clasper.

The bands and their management are far from impressed. As Radiohead's manager, Bryce Edge, said: "When you're dealing with creative talent, there's a lot of risk-taking that goes on. That's where Terra Firma is going to struggle."

Hands has uncovered all sorts of costs he has never seen before, from multi-million-pound "hand out and hope" advances to artists to a £20,000-a-month bill for candles. He is said to have been astonished by EMI's £200,000-a-year spend to keep its Hammersmith head office in flowers and fruit. Seasoned industry executives, however, know that "fruit and flowers" is shorthand for artists' partying requirements.

But this isn't just a flabby, badly run business which Hands will easily be able to lick into shape. The entire industry has been battered first by piracy and now by legitimate downloads which, while growing fast, are not offsetting the fall in CD sales. The big moneyspinner is now touring, which labels generally do not get a slice of - although EMI is said to want in on the act.

At the same time, the artists are becoming more powerful. The internet has given them more control. Clark said: "There really are other people, very good people, that can do the finances, do the press, market, promote and so on - and do it hugely competitively."

Artists also want to control their back catalogue and if they are unhappy can walk out - as Radiohead have done. As singer Thom Yorke explained on the band's website: "What we wanted was some control over our work and how it was used in the future by them - that seemed reasonable to us, as we cared about it a great deal. Mr Hands was not interested. So neither were we."

One EMI executive said Hands is still convinced that he can turn EMI around, but needs to get rid of entrenched interests, like Wadsworth. And not everyone thinks he will fail, or that the end of the major label is nigh. EMI's Lily Allen has attacked Radiohead, which allowed fans to pay what they liked for a download of their latest album, for "devaluing music" and Pet Shop Boys' Neil Tennant said he had no interest in marketing and distribution: "I just don't want to be in that business. I'd rather complain to EMI if it goes wrong."

Peter Ruppert, who runs music consultancy Entertainment Media Research, said Hands could turn EMI around by treating it like an independent label but sticking to strict business rules: "In the past it was about who had the biggest chequebook but it's really about who works the smartest at it and who can make the music business work, and work for the artist."

Today's best video

Today in pictures