"The name record label' is very limiting

Tuesday November 25, 2008

By Robert Ashton

When Guy Hands took over EMI last year he signalled a change in direction. He installed Elio Leoni-Sceti as chief executive to facilitate this, embarking on a research-led mission to return the group to profitability and leading the way in the 21st century, Music Week talks to Leoni-Sceti about his plans for the company

A couple of minutes in the company of Elio Leoni-Sceti and two things become apparent. He talks a lot. And he does so very, very quickly. He’s like a gattling gun on fast forward, with an Italian accent thrown in for good measure. It makes for an idiosyncratic delivery, but a highly engaging discourse.

Maybe he’s excited. He should be. The newly-installed EMI Music chief executive is partway through a worldwide tour of EMI offices – he’s taking in Los Angeles, New York, Toyko, Paris, Milan, and Cologne – to share his vision for the group with its thousands of employees.

That’s a big deal because it is the company’s new management team’s first opportunity to outline how it expects to begin to operate successfully in the digital world.

It also comes after almost 12 months of (mostly) bad news from the major, bookended by its owner Guy Hands announcing job cuts of up to 2,000 people in January and unveiling massive year-end losses of £757m just a few weeks ago.

Leoni-Sceti says the redundancies are now “in process” and there will be a continual “understanding about our cost base right for growth”. Similarly, the 14,000 acts on the label, which Hands called “not sustainable” and wanted to slash, is being addressed.

Maltby Capital (the vehicle Hands used to acquire EMI in August last year) recently revealed that 88% of artists on the company’s roster made a loss. Leoni-Sceti doesn’t want to get into the artists’ numbers game – “I don’t think any number you suggest is right because it is evolving all the time” – but insists that EMI can now make decisions about its roster on strong financial information. “The one thing we have, that we didn’t have before is actually being able to inform our decisions on visibility of financial Data about the roster,” he adds.

He is continuing to look at making efficiencies in manufacturing and logistics. “The manufacturing of CDs is not frankly core to us and who cares who does it?” he says.

Now he wants to put an end to all the negativity surrounding the British major. And his main tool for doing that – believe it or not – is his ears. Leoni-Sceti wants to listen. Not to acts, but to the company’s customers.

“This industry has been blessed by a revenue stream that was coming, and it was not forced to really scratch its head very hard to find the next one. We are doing it now,” he says. “What I have learned is to listen to consumers. I have been passionate about that.”

Leoni-Sceti hunches over an inch-thick stack of notes and diagrams full of organisational charts and mission statements on the massive round conference table in his office. He excitedly shuffles through the PowerPoint presentation, picks out the odd page and begins to rattle off what he and his team have been working on since he joined EMI in the summer.

Mostly, it’s about getting to know the EMI customer. “(We want) to bring the artists and the fans closer together. The word ‘closer’ builds on the concept of knowledge. That knowledge will help drive actions of both the artist and fans to create value. The actions (mean) basically giving the artist the knowledge of where the fans are and where to reach them… and to drive fans to action by bringing music to them so they can act upon it.”

The chief executive flicks through another wad of highlighted targets and buzz words before declaring that EMI is going to be much, much more than just a record label. “The self-defined name of record label is just plain wrong,” he asserts. “I think it is very limiting. I think we are much more than that. Wherever music meets people, that’s where we want to be. Our mission is to ensure action and value is created wherever music and people meet and wherever they experience music.

To help achieve that, Leoni-Sceti is restructuring the group with three business units – New Music, Catalogue and Music Services – across three geographical regions.

New Music will see Nick Gatfield, president of A&R - North America and the UK & Ireland and Billy Mann, president of A&R – international and of global artist management take charge of “creative leadership” while EMI Music’s president of digital Douglas Merrill will assume charge of “commercial leadership” within the unit as chief operating officer. Leoni-Sceti, himself, will lead the New Music unit as its president, in addition to his overall chief executive role.

EMI Music’s Catalogue unit, which will, as its name suggests, concentrate on squeezing every last drop of value from the group’s “fantastic music assets”, will be headed by newly-appointed president of catalogue Ernesto Schmitt, who will join EMI in December.

Then there is the new Music Services unit, which will be headed by president, Ronn Werre and will focus on driving additional revenues in areas including sales, music licensing and synchronisation, brand partnership and sponsorship.

So far, so what? Every new company chief instigates restructures which they promise will deliver the earth. What is different about Leoni-Sceti’s vision is that he isn’t just relying on a reshuffle to deliver a re-energised workforce, who will suddenly be working their magic on the balance sheet.

The 42-year-old has a lot more ideas up his crisp-checked shirt sleeves, picked up during his 20-odd years working in companies such as Procter & Gamble in six different countries, including the US, Germany, Belgium and France.

And one of these is innovation. Leoni-Sceti wants EMI to continually innovate. There will be the innovation and creativity generated in A&R with Gatfield and Mann continuing to try and unearth the next new big thing.

And then there is the innovation that comes from – as Leoni-Sceti describes it – “leveraging existing technologies and existing infrastructure.” This, the Rome-born executive says, is the key to the future because he believes it will be a way for EMI and the music industry to begin to reclaim control of the way music is experienced. iPod came from Apple, but Leoni-Sceti wants the next big musical development to come from EMI.

“Every other industry innovates on its own products,” he claims. “The innovation of how music is experienced has not been (from) the music industry. I think we have the ambition, the capabilities and the vision to regain that leadership in innovation of the way music is experienced. And I want to create the conditions for this to happen. I want to regain the leadership of the innovation in the music industry by ensuring we think about how best fans and artists experience a closer relationship. I don’t know if that is answered by technology, by different audio visual, by distribution channels. We need to find that, but it is our role to find it.”

Underpinning all of this innovation and creativity is the commitment to know more about EMI’s consumers.

A lot of work has already been done in this area, with Leoni-Sceti claiming to have identified six different types of music consumer and how they behave. Unfortunately, he says these definitions are confidential, but it is something the company will be continuing to build on, using input from a new department called Consumer Insight and Analytics.

EMI.com, the “learning lab” that is expected to launch in December, will feed into this by providing a continual interface with consumers. “In our learning about the consumer there are different aspects. Some of them are about consumer behaviour, motivation and desires in the way they consume music at different touch points, whether that is live, digital or physical. One of the elements of the learning plot will be to enable us to interface with [consumers] on a constant basis as a learning lab,” he says.

All of this sounds suspiciously like the sort of research men in white coats with clipboards do as part of consumer testing for the launch of a new soap powder. Isn’t Leoni-Sceti treating music like any other brand – exactly the sort of charge Big Life’s Jazz Summers and others levelled at Guy Hands when he took over the company?

Not at all, says the chief executive. “It is ridiculous to think [of] marketing music like a brand; it is not a brand. A brand is a set of physical values, an expression of physical values. Music talks to your soul, to your heart to your inner senses. It doesn’t talk to your physical senses,” he explains. “You consume your food in a different way to reading. [But], the process of learning and responding is comparable across industries – cars, music, food, books – because it is about learning what people want and defining an answer to their desires. So the process is the same, but the way you interact is completely different.”

Apparently, all this research and understanding will help EMI in two ways. It will mean the A&R process can be better informed and executed. It also means EMI will be better able to identify market gaps. “[You can be] instructed by a market or consumer need. Is there a need for kid’s music? You can actually see market gaps and market needs in individual genres and try and address them by focusing one element of the creative process in that direction,” he says.

Remarkably, with all this up and working the chief executive believes the music division will return to profitability again as early as next March. Not surprisingly, with this upbeat message Leoni-Sceti, Gatfield, Merrill and Werre got a good reception when they presented this blueprint to Wrights Lane staff recently.

An insider says, “There was a real sense that Elio was helping the company put the past behind it and unveiled a plan to move us forward. Staff were glad to see a strong plan and pleased to have it talked through.”

Another staffer at the meeting was equally impressed with the strategy. But he adds he will feel a lot more confortable when EMI signs more acts.

Naomy