Guy Hands Renounces Bonus, Should Probably Get Rid Of Mattafix

Guy Hands’ troubles continue, after his investment vehicle Terra Firma has accepted that it spent too much buying out EMI at the top of the market. It announced a €1.37bn impairment charge in their annual review that EMI contributed most to; an impairment charge is basically a loss made when reassessing the value of a company and having it come up shorter than it was. It comes after Terra Firma had to absorb some of its investors last week, after the investors found they couldn’t pony up the dough they’d promised.

Well, it’s galling for Hands to have to publicly join the ranks of investors who didn’t gaze long or hard enough into their crystal balls while the market was high, but now that EMI’s value has been properly assessed, it’s all uphill from here. The label had a great year last year in some ways, posting a rise in earnings before tax from £12m to £104m in the nine months to December. But if they want to keep paying Citigroup £32m a quarter for a £2.7bn loan, they’re going to need to do more than stop buying candles and nice hotels for Lily Allen; they’re going to have to start culling the dreck from their roster.

In their annual review, decorated with pictures of rocky shorelines (not sure about the message being given out there), they say that ”EMI will be more selective in its artist relationships” and “rationalise existing artist rosters”, alongside the less equivocal “reduce headcount by 1500-2000″. Finally, finally, they’re going to get rid of some of the artists sitting around on their advances without a hook to their name. To take a microcosmic look at their empire, just look at the list of acts beginning with the letter “M” that are signed to EMI. MIMS? Mando Diao? Mattafix?! Multiply that out over the rest of the alphabet and their sprawling empire of other labels (Capitol, Chrysalis, Parlophone and many more) and there’s a lot of money-saving to be made, that will thankfully also spare the world some terrible pop music. 

Even more heartening is when Hands argues for “incentive structures” (i.e. bonuses) to be “long term in nature, and by long term I mean at least 5-10 years”, before promising to hand back to investors €80m in performance fees earned (but not yet paid out) since 2004. “This is absolutely right; our investors have suffered and therefore our rewards should suffer at the same time”, writes Hands. As post-recession penitence goes, it’s the boldest we’ve seen, and it’s perfectly timed for Hands to cast himself in a golden glow while Goodwin et al face the baying mob. Signing off with a quote from Abe Lincoln may be over-egging the pudding slightly though.

Ultimately though, they need another Coldplay to keep their income at a viable level. So which of these EMI “breakthrough artists” do you think will make the grade? Wagner Love? Trouble Andrew? Red Jumpsuit Apparatus? Good luck Guy!

Posted by Ben Beaumont-Thomas in Hot Money | March 3, 2009 12:18PM |