An earlier, leaked memo attributed to the Terra Firma CEO threatened to drop thousands of artists from the label, and he demanded that artists work harder so EMI could more than double its profits.
Over in the US, Chrysler announced late last year that it would cut about 15 percent of its work force, only six months after being acquired by another private equity firm, Cerberus Capital Management, L.C. That was on top of the 13,000 heads the company had cut in order to make itself attractive to buy-out suitors in 2006.
Sounds like a lot of unpleasant, messy, people sacrifices and punishment.
What happened to all that glowing doublespeak about the value of brand equity?
Rock bands, like cars, are only as good as their last releases. You'd have to imagine that the hard-nosed private equity folks valued the EMI and Chrysler buy-outs on the very tangible specifics of offers, production costs, distribution channels, purchase rates and margins, etc.
Sure, there are groups of people who could be depended upon to buy a Rolling Stones album if all the band did was burp, or buy a Dodge vehicle that dragged its transmission along the pavement. But that's not brand loyalty, it's insanity. And it's not what you base a realistic business plan upon.
Rather, the vast majority of would-be purchasers upon whom EMI and Chrysler depend for profits are a bit more sane. Consumers know that EMI's aging artist roster and Chrysler's tired vehicle badges don't have any implicit value beyond the specific criteria of offer, time, and place. They'll buy good songs, and drive cars that are competitively attractive.
So what do the private equity sharks do when they acquire a company?
They certainly don't throw money at branding; rather, they adjust levers in every other functional department. Employee rosters are slashed, processes are streamlined, sourcing is improved, financial management is fine-tuned, etc.
Whether we're talking music or metal, the equity firms' tool of choice is efficiency. In doing a better job of making things, they presume that the things they make will be better, too. And that better stuff will sell better.
As for marketing, they just fire the people who've been responsible for it. I'd wager there's no expenditure underway or planned at EMI or Chrysler that isn't somehow linked not to brand awareness, but rather to prompting sales.
So greed is good?
If consumers make purchase decisions based on reality, and not on the fantasies of brand marketers, and the private equity people are realists, perhaps it's match made in spreadsheet heaven?
I think it depends.
Financial rigor could prompt an entirely new approach to branding, by viewing it as a function of measurable behavioral inputs and outputs, like any other corporate activity. It could dissipate that hazy cloud of brand formed by expensive marketing with no other purpose, and from which immensely important, yet vaguely undependable and often invisible, benefits descend.
I have no idea what the programs would look like, but a different measurement criteria -- branding needs to make real money, not fantasy equity -- would certainly yield different ones, so much so that private equity people might do branding without ever calling it "brand," per se. It might arise from the functional attributes of their more-efficiently-made products. Maybe in this way, brand marketing could gain a new lease on legitimacy
Conversely, they could simply slash and burn their way to better margins, squeeze the supply side of the equation, and hope it prompts demand. Perhaps they intend to flip these companies before anybody figures out what'll eventually happen.
It's just interesting that we never hear anything about branding from these people.
Maybe they know something we don't?