By attaching brand names to artists, Hands hopes to generate much-needed revenue, likening bands to football clubs. 'In short it will make EMI's music more valuable for the company and its artists alike,' he told staff last week.
The idea of record companies linking brands with bands is nothing new. The New Seekers' hit I'd Like to Teach the World to Sing was adapted from a song composed for a Coca-Cola ad in 1971, while T-Mobile sponsored the Rolling Stones' 'Licks' World Tour in 2003. However, sponsorship of this sort has never been tried on this scale before, prompting scepticism from experts.
'Football fans accept the commercialisation of teams because it has long been woven into the fabric of the game,' says Rupert Pratt, managing partner of consultancy Generate Sponsorship. 'The music industry is younger and bands are much more protective of their image.'
Few doubt the commercial potential of Hands' strategy, but sponsoring modern pop and rock acts is likely to be a high-risk strategy for most big-name brands. 'Very few artists are socially responsible 100% of the time,' says Pratt. 'This will be a major problem for brands that decide to go down this route.'
Phillip Patterson, associate director at Karen Earl Sponsorship, disagrees. 'The risks involved in sponsorship are the same whether you're talking about football, athletics or music,' he argues. 'Brands that embark on these deals do so with their eyes wide open.'
EMI Group last week announced radical plans to cut £200m in costs. Hands intends to axe one in three jobs, slash marketing spend and clip the wings of 14,000 artists, including Coldplay, Robbie Williams and Kylie Minogue.
EMI is responding to the changes sweeping the music industry. With digital downloads now accounting for more than 90% of all singles sold in the UK, EMI needs to take immediate action to boost flagging earnings and modernise its business.
The central plank of Hands' strategy is to make EMI's existing roster of artists more profitable by promoting single digital tracks rather than albums and ditching hefty advances in favour of payments linked to record sales.
The EMI rescue plan will involve a marketing budget cut from more than 20% of total spend to between 12% and 15%, although Hands intends to channel extra funds into digital advertising to boost download sales. Further, all EMI's non-A&R functions, including marketing, promotions and digital strategy, will be grouped under a 'music services' division responsible for negotiating with partners such as retailers and digital providers, centralising activities to help compensate for falling CD sales.
The size of the challenge facing EMI, and the wider music industry, is not in doubt. The UK market for digital downloads grew by 30% last year with 86.6m singles sold, while sales of CD singles fell 41.4% to 6.63m. This has prompted labels to rethink their business models. 'So far, sales of digital music do not appear to be making up for the decline in traditional sales,' says James Bates, media director at Deloitte. 'Consumers spend relatively little, an average of £10, on buying digital downloads.'
While other music companies appear to be mounting a robust response to the change in consumer habits, EMI made a loss of more than £263m last year. Unfortunately for Hands, things look set to get worse before they get better. Both the Rolling Stones and Paul McCartney have quit the label, the former after 16 years and the latter after 45, while Robbie Williams is believed to be 'on strike' - delaying delivery of his next album until he knows how EMI plans to promote it. Music agents are also reportedly advising clients not to sign to the label.
Artists such as Arctic Monkeys and Lily Allen have proved that emerging acts don't need a record label to break into the charts, both using MySpace to build their fan bases. Perhaps more significantly, Radiohead parted ways with EMI last year, releasing their latest album In Rainbows as a 'pay what you like' web download, before signing to an independent label for its CD and vinyl
release. Additionally, Slicethepie.com, a website that enables music fans to 'run their own label', estimates that more than 30 unsigned artists will secure
financing through it this year - more, it claims, than EMI, Sony BMG or Warner Music achieved in 2007.
Hands has recruited most of Terra Firma's key staff to help improve EMI's fortunes, but with just a 6.3% share of the UK artist album market, compared with Universal's 51%, they have a tough job ahead.