Amidst all the bad news for record companies lately, the newly reconstituted EMI was bubbly last week when the company announced a $246 million profit. Of course that profit was a direct result of massive cost cutting. And from what I hear, the cuts are very, very deep. A buddy of mine was visiting the EMI offices in London last week and was stunned to see that all offices were eliminated with an open floor plan of desks taking their place. Each department/label is just a series of desks. For instance, the once great Virgin Records now consists of just 4 desks in a corner. According to my source, “there’s just no way you can properly operate a label this way”. But there’s more. I even hear that all subscriptions to the Wall Street Journal have been cancelled in order to save money. This is truly awful as it means that execs will have to pay for their own copies of the WSJ. But along comes the true irony. Ready for this?
Last week the Sony Corp announced their own bad news, having lost over $1 billion in the last year. Although Sony doesn’t break out its music numbers, we all know that business has been bad all over. Sony has been on its own cost cutting rampage and has been tightening the reins on travel and entertainment expenses. They fired the head of their commercial music operation a couple of months ago, John Ingrassia. Ingrassia was a very highly paid holdover from the Don Ienner days. And they have been aggressively cutting executive pay. But something interesting happened last week. Sony Music sued EMI over an executive. Seems as though EMI exec Ron Werre had signed a deal to move to Sony to take Ingrassia’s spot in 2010 when his EMI contract was up. The deal was to pay Werre the modest salary of $1million a year for three years! Now that’s what I call cost cutting. But after Werre had signed his new Sony contract, he changed his mind and decided to stay at EMI where he was promoted to COO of North America.
Now, let’s examine this. Is there any doubt that Werre is staying put at EMI for LESS than that $1 million annually that Sony guaranteed him? No fucking way. So that means that EMI is shelling out big bucks for this guy. Once again, terrific cost cutting, guys. Furthermore, is there any way that Werre would agree to stay at EMI unless the company indemnified him? No way. So in order to keep Werre around EMI will be shelling out more than $3 million in salary and another potential $3 million to Sony if they prevail, and, of course, attorney fees.
So my assessment is that Ron Werre must have 14 karat solid gold testicles since somebody thinks he’s worth over $6 million.
You just gotta love how stupid the record business is.
UPDATE: I was talking with a buddy of mine who is a high level industry veteran and he pointed out that there is a bright silver lining in this for Sony. According to my friend, Ron Werre could turn out to be Sony’s biggest profit center of the year!
© 2009, Wayne Rosso. All rights reserved.
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