Nick Gatfield, the recently installed chief executive of Sony Music UK, is reflecting on his brief stint at EMI, where he was a senior executive for two and a half years before heading for the exit in January, just as acts including the Rolling Stones and Radiohead had done before him.
"It was an interesting experience but not one I'd want to repeat," he smiles. The acquisition of EMI by Terra Firma, the private equity group founded by Guy Hands, has already become the stuff of legend, principally because it was one of Hands's few botched deals, but also because of the culture clash it prompted between straight-laced bankers and creative music industry types. "You had a private equity group and on top of that, people with 'fast moving consumer goods' type backgrounds trying to manage the business as if it was a production line of inanimate products," Gatfield says. "Taking someone out of Procter & Gamble and putting them in a music company – it's just an uncomfortable fit." Consciously or otherwise, Gatfield is echoing the words of the EMI acts who grew impatient with the "suits" who had bought the company. Radiohead's Thom Yorke said EMI was like "a confused bull in a china shop", although there were also disputes over money.
"Your 'product' is human beings who have opinions," Gatfield says, leaning forward on the sofa in his spacious corner office at the west London HQ of Sony UK, the company which appointed him chief executive in July. He gives an example. "I remember someone at Terra Firma asking why the [release date for the] Gorillaz album had slipped. I said 'well, you know, Damon [Albarn]'s not ready,' and he said 'But it's on the release schedule'". The art of managing talent, Gatfield says, is to "reduce that slippage" as far as possible, but it's impossible to treat artists as commodities and reduce the art of making music to a box-ticking exercise. "Terra Firma didn't like the dark arts of A&R," he says. "A lot of it is done by gut instinct."
He adds: "I will give Guy a huge amount of credit because I think some of his instincts were fairly sound [but] the business to him was far more complex than he thought it would be. You're dealing with the psychology of running a creative business."
Not all of Terra Firma's ideas were bad ones, but the manner in which they were implemented was clumsy, he suggests. "There were plenty of 'foot in mouth' moments'," he recalls, adding that the attitude of many of the firm's executives was that "everyone in the company [EMI] is an idiot". In fact, "the music industry is populated by very passionate and highly intelligent people. It's not like everyone's been asleep at the wheel."
Like the rest of the industry – Sony included – EMI had been on a long journey, battling structural problems that aren't easily resolved. Piracy has robbed record companies of revenue. The government's determination to crack down on persistent offenders by introducing a "three strikes and you're out" rule in the Digital Economy Act, though welcome, doesn't go far enough, according to Gatfield. "Broadband businesses are being built on the back of illegal filesharing", he says. "As high-speed broadband becomes ubiquitous the problem is going to get bigger and bigger. We need site-blocking, and its an incredibly spurious argument for the ISPs to say that they can't do it because they can do it and they do do it."
Gatfield complains the letters that will warn ISP customers who download illegal content to desist or have their connection slowed, or even cut off, will not start landing on doormats until 2013. "It's too slow. It's onerous, and the lion's share of the cost … is picked up by the recorded music industry."
He is relieved that the film and video game industries, along with other content owners, have joined the lobbying effort, however. "That's a force to be reckoned with," he says. "I'm an optimist. In the next two or three years you are going to see the business coming out of the trough it's in at the moment." The digital revolution hasn't been all bad, he adds, saying that downloads account for around 35% of Sony UK's music sales.
"In a weird kind of way this business needed a massive shakeup," he concedes. "It clearly got bloated on the back of the CD boom. The size of the business didn't represent the size of the opportunity."
Now that it has been through a painful process of downsizing and consolidation, his focus is on breaking new acts. "The business has to be less cynical," he says. "If you have a brilliant piece of music people will flock to it and they will buy it. Quality will out." He name-checks a few acts, including Chloe and Labyrinth, but worries he has failed to mention others. Perhaps as a musician himself – Gatfield was a member of the 1980s band Dexys Midnight Runners – he is alive to the pressures artists endure. He moved from front of stage to back in 1985 and says his time in Dexy's taught him invaluable lessons. "Yes, I've been in a very successful band," he says, recalling the global success of Come on Eileen and Too-Rye-Ay, the album the single was taken from. "But I've also been an abject failure" [the followup, Don't Stand Me Down, was a hit with critics but a commercial flop] "I've experienced quite a lot, albeit sadly, 20-plus years ago."
He says Too-Rye-Ay, made for £30,000 in a tiny Birmingham studio, sounded far better than its successor, but wonders if the album can survive in the modern music world. In the old days, he says: "You did album sales on the back of the hits. You can't get away with that now. The album kind of become a default carrier but I think it would be wrong to assume it will be the carrier of the future." Sony is already looking at 50-track deals or signing new acts that may release just a handful of songs, he adds.
In the US, the company is on a roll, with huge established acts including Beyoncé and Kings of Leon on its books. "To a certain extent it's been a curse for the company because it has taken its eye off the ball when it comes to domestic A&R," Gatfield says. "It could hide behind a big American release. The labels have been able to coast a little bit on the success of that."
That is creating some insecurity with Sony, as label bosses and staff wait to see what Gatfield will do next. A senior executive mutters darkly about the coming reorganisation when we bump into him on a tour of the building and insiders say the new boss has put noses out of joint.
"We have changed the business model because the labels were marketing machines," Gatfield says. Those functions, including retail and promotional campaigns and price positioning, are all done by a central marketing operation, leaving the labels to concentrate on breaking new acts, he says. "The lifeblood of the business is A&R and new talent."
He says Sony has a big opportunity now that the big four groups have become three following the acquisition of EMI by Universal, which outbid Warner Music. "Compared to our competitors we are a pillar of stability."
Sony UK has also been criticised for being over-reliant on the phenomenally successful X Factor franchise. The company co-owns the format with Simon Cowell's company Syco, which is based at Sony's London offices, and has a roster of former contestants on its books. "It's an absolute gift," he says. "I don't take it for granted. X Factor-related artists will do about 3 to 3.5m albums in the UK alone this year."
Gatfield can't resist adding that the debut single by the winner of The Voice, the American rival to The X Factor that will be launched shortly in the UK by the BBC, sold "around 9,000" records. What proportion of sales are generated by the show's talent? "I don't know the figure off the top of my head," Gatfield says, "and I don't really want to share it with you."
Has the TV show evolved from a talent contest into a soap opera, as some critics claim? "Simon's view is very much that this is a music discovery show. Of course it happens to be hugely entertaining and the biggest show on TV. It's the emotional journey people go on – that's what engages people." But he rejects any suggestion that the show is exploitative. "Rebecca Ferguson was saying to me she'd written to every record company, every management company – she didn't even get a reply. She was a single mother at 17, from a tough working-class Liverpool background, a bright girl who became a legal secretary but whose passion was music. As a platform for that I think it's invaluable." But will the show's winner produce this year's Christmas No 1, as it has so often in recent years? "I think it'll be the Military Wives," Gatfield says. You read it here first.