Buried in a “music-industry-screwed” roundup in the Economist is this nugget: An allegation that music label EMI was spending $400,000 a year on party favours (booze, drugs, women, whatever) for its talent:
Now, having got rid of most of EMI’s senior managers and revealed embarrassing details of their spending habits (£200,000 a year went on sundries euphemistically referred to in the music business as “fruit and flowers”), Terra Firma is due to produce a new strategy later this month. But many observers reckon the private-equity men are out of their depth.
Prior to reading the article, we’ve heard two different versions of the EMI “flowers” story: One is that Guy Hands, the private equity boss who bought the company last summer, didn’t understand the term and couldn’t figure out why EMI was spending so much on floral arrangements. The more flattering version: This was exactly the kind of excess, unheard-of anywhere but the entertainment industry, that Hands was planning on cutting after he bought the company.
It doesn’t matter if either version is accurate: The more important truth is that EMI, like every other big music label, is watching CD sales fall off a cliff — the Economist story leads off with an anecdote in which an EMI focus group is offered a pile of free CDs, and refuses to take a single disc — and digital sales aren’t growing fast enough to replace them. And as long that’s the case, it doesn’t matter what your flowers budget is. Economist, via Ed Cone.
Update: Flowers aren’t the only thing getting cut from the budget — reports say Hands plans on firing 2,000 of EMI’s 5,500 workers.