BusinessCompany NewsEMI: Facing the music

EMI: Facing the music

EMI begins to feel the pinch as internet pirates and disastrous deals eat into music giant's bottom line.

The recording industry is going through a rough patch at the moment and British music group EMI has been in the thick of it.

A string of profit warnings over the past few years, falling record sales, the threat from internet piracy, badly judged artist deals and costly legal battles have all taken their toll on the world’s third-largest record company.

There are hopes, following the appointment of chairman Alain Levy and vice chairman David Munns last October and a severe cost-cutting exercise, that the company will begin to show signs of a turnaround when it publishes interim results next week.

However, there is still quite a long way to go before the company gets truly back on its feet. Last year, the group posted a loss of over $310m (£195m), has just been removed from the FTSE-100 index and is still subject to industry rumours that it could be swallowed up by a larger competitor.

EMI is home to some major artists including Coldplay, Kylie Minogue, The Vines and Robbie Williams – recently re-signed for an amount rumoured to be in the region of $80m. It also has a very strong back catalogue from the likes of The Beatles, Frank Sinatra and Queen. However, profits from the development of these artists are being eroded by the increasing number of people sharing music files over the internet.

The Recording Industry Association of America estimated that US music shipments for the first half of this year fell by $400m (£252m) from the same period 12 months ago, while sales of illegal recordings were estimated to cost the music business $4.3bn (£2.7bn) worldwide last year.

There is very little sympathy from the general public over the serious nature of this problem though, especially when many of the major music firms, including EMI, have been accused of price fixing.

The group was recently involved in a case that alleged the five largest music distributors had colluded to set minimum advertised pricing policies on CDs in the US. It was eventually settled for $143m (#90m) and minimum advertising pricing policies have been removed.

Even with the desperate need for a turnaround, the company has gone on record to say it will continue to develop artists with a long-term appeal who will provide strength for the back catalogue – so the likes of Blue and Atomic Kitten could be around for some time to come.

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