EMI merges Capitol and Virgin labels in U.S.

As part of our recently announced restructuring program, and after careful review of our US operations, I now want to share with you some important new initiatives for EMI Music in America.

New Capitol Music Group

Today we are announcing the merger of EMI's Capitol and Virgin labels in the US to form the Capitol Music Group, a front line pop, rock and urban label group. The combined artist roster, talent and market share of this new label group establishes Capitol Music Group as one of the US music industry's leading labels. We will maintain operations in both New York and Los Angeles. Capitol Records and Virgin Records will remain as imprints under this new label group.

The music business shows exciting growth potential, but the environment remains extremely challenging. In order to thrive and meet the demands of a rapidly evolving and dynamic music market, we must re-think our operations, not only to make them more efficient, but also more effective and focused on creative excellence. By bringing Capitol and Virgin into one label group, we'll be better equipped than ever to promote and nurture artistic talent. We remain strongly committed to developing artists in America in all genres as this is a key repertoire source for the world, and to that end, we will maintain our A&R focus and keep a presence in both LA and New York.

I have appointed Jason Flom to lead The Capitol Music Group as Chairman and CEO, reporting directly to me. Since joining EMI in 2005 as Chairman and CEO of Virgin Records America, Jason has quickly proven his leadership abilities and artist development talents. He and his team have aggressively and creatively pursued digital opportunities that have made a demonstrable impact on the company's performance. His track record as a hit maker was well established prior coming to EMI, with artists he signed and worked closely with selling more than 150 million records worldwide.

I am confident that as leader of the Capitol Music Group, Jason will help elevate EMI's US front line label operations to new levels of success in the pop, rock and urban genres.

Andy Slater has today stepped down as President and Chief Executive Officer of Capitol Records, a post he has held since 2001. While here, Andy revitalized Capitol as a home for quality music and made significant contributions to the business, including breaking key artists from outside the US such as Corinne Bailey Rae, Coldplay and Kylie Minogue in an extremely competitive American marketplace. I thank him for his efforts over the years and wish him well in all that he does in the future.

More specific announcements about the management team at Capitol Music Group will be made shortly.

Additional Restructuring Initiatives

Our restructuring program will result in additional workforce reductions throughout our US operations. At the same time, we will increase our focus on building our digital capability.

Many of you will hear more about these changes in meetings with your department heads and HR.

These changes won't be easy. Some of you will be asked to take on new responsibilities and roles. But these measures are absolutely necessary for our business to succeed in a world where fans are evermore demanding and expect instant access to their favorite artists and music. We must be ready to satisfy rapidly changing consumer appetites. And, we have to be prepared to seize opportunities that we can't even predict today.

EMI's US Portfolio of Labels
The new Capitol Music Group, headed by Jason Flom will be part of a portfolio of labels that position us to be best-of-class in all genres in the US market. These labels will be supported by a talented central staff and reporting responsibilities will be as follows:
* Ivan Gavin, COO EMI Music North America, will continue to report directly to me, as will Colin Finkelstein, CFO EMI Music North America, and the legendary Bruce Lundvall, President and CEO of the Blue Note Label Group.

Ø Reporting to Ivan Gavin will be:
o Ronn Werre, President EMI Music Marketing, who will continue to oversee the US sales organization, EMI's successful catalog marketing unit and its strategic marketing and special markets units;
o Mike Dungan, Capitol Nashville President and CEO, who has been responsible for some of EMI's best-selling records in the US in recent years;
o Bill Hearn, EMI Christian Music Group Chairman/CEO & President, who continues to set the gold standard for the Christian market; and.
o Bill Hein, General Manager and SVP, Caroline Distribution, as we continue to develop a full service distribution and marketing operation for independent labels. Bill will also continue to oversee Astralwerks

EMI Televisa will continue to operate as EMI Music's US Latin label, with Rodolfo Lopez-Negrete continuing in his role as President, reporting to EMI Music Latin America's Marco Bissi.

Notwithstanding the anxiety that a restructuring program of this scale inevitably creates, I believe passionately that EMI has a tremendous future in America. I am excited by the opportunities open to us all and to our artists.
You have my assurance that we will get through these changes as quickly as possible so that we can get on with our business of finding and nurturing the best artists, serving consumers and delivering music to fans whenever, wherever and however they want it.

With best regards,
Eric
January 2007