Firm Hands Will Squeeze Out EMI Profit

Guy Hands’ Terra Firma is wooing potential investment partners in EMI by telling them they could quadruple their money and cash out within five years, according to a report in the New York Post.

The paper claims to have a leaked investor presentation that Terra Firma plans to improve its EMI investment by 2 to 3.9 times through a mix of cost cuts, dramatically improved digital revenues and strategic acquisitions. Terra Firma hasn’t commented on the Post’s revelations.

The U.S. daily also says the biggest cuts are likely to come in the recorded music sector, where the company is looking to "wring out US$223 million in fixed costs, on top of existing EMI cost-saving initiatives."

Terra Firma, which has US$1.5 billion in equity in EMI, also sees significant savings from cuts in operations in non-strategic countries.

It also wants to reduce costs in artist-and-repertoire and marketing by US$58 million by using social networks and user-generated Web sites like MySpace to discover and promote talent.

According to the Post, Guy Hands’ venture capitalist company is looking to improve the recorded music businesses’ cash-flow by more than 700 percent over five years – from an estimated US$43 million in 2007 to US$1.1 billion in 2012.

It’s reportedly doing this by driving more than US$700 million in improved margins from online and mobile music.

How Terra Firma gets there remains to be seen, but the Post said a source at the firm said it isn’t ruling out "large-scale transformational acquisitions/business combinations," including deals with other recorded music companies, touring companies, and artist management businesses.

It’s also said to be looking at a number of smaller-scale indie labels and has at least US$100 million set aside for purchases with hopes to raise that figure to US$200 million.