The Financial Times' Lina Saigol has a piece titled "Legacy of Winning the Wrong Auction" that's worth a read. An excerpt:

"Bankers bored of the credit squeeze are now obsessing over Guy Hands and his £4bn investment in EMI. Word is the chief executive of buy-out group Terra Firma is in a wild panic about his impulsive acquisition and how he'll manage to make a return on the record company he bought on the back of 43 pages of basic due diligence."

Saigol outlines five problems: too much money invested in EMI; too many staffers working only on EMI; cutting costs without hurting performance; securitising music business cash flows in a tough credit market; and Hands' "shape-up-or-ship-out" stance with lazy artists.

If I was going to add something, I'd expand on Hands' cost-cutting plans. For example, Terra Firma's proposal to cut A&R expenses in part by scouring social networking sites for new talent would make for a horrible strategy. If EMI invests money based on often meaningless MySpace (and the like) popularity, it's going to find itself with a roster of Tila Tequilas with little long-term potential.

Another problem with cost-cutting is that it will hamper labels' and distributors' ability to properly work releases. The natural result will be fewer releases to match the lower level of costs. Fewer releases equal lower revenue. This is the nature of an industry that is rather unique in the business world: entertainment companies must constantly launch a high number of new products. Big earners tend to have short shelf lives and must be replaced by new earners.

Success through cost cutting makes far more sense in an industry with more stable revenue and long-living products with a high level of brand equity. Hands should focus more on internal improvements and investments and less on cost cutting.