EMI's Digital Revenues Rise, Losses Fall By Half Amid Aggressive Cost Cutting
This story was written by Patrick Smith.
As the music biz tries to cope with a disappearing physical CD sales market, EMI appears to be taking some steps in the right direction. The company's digital revenues rose to 102 million in the six months to September 30, a 38 percent increase from the previous half's 74 million figure, according to an interim statement released Friday. Terra Firma-owned EMI has reason to be slightly relieved that its losses for the half-year fell to 155 million, from 324 million in the previous six months, while operating profits rose to 6 million, compared with a 200 million loss previously. The results follow a year of paring expenses, including the cutting of hundreds of jobs.
EMI chairman Lord Birt conceded that the music market is in turmoil, not least with the collapse of high street retailers Woolworths and Zavvi, leading to "concerns over the future availability of music retail spaces". But the former BBC director general says the latest figures are cause for some "qualified optimism" and lists the good-news developments for EMI in 2009 as continued sales of Nokia's Comes With Music phone, the "phenomenal success" of music video games like Guitar Hero, the forthcoming Harmonix/MTV game based on songs by The Beatles and even musical toothbrushes. But it's only "part way on the road to recovery" according to Birt, and he predicts more hard work to make EMI ready for the brave new music industry world. More after the jump
Digital growth, physical decline: EMI managed to increase digital revenues by 50 percent in its first half, bringing the proportion of all revenues from digital to 21 percent, a five percent rise period on period. EMI now has 12.6 percent of the total download market, up from 11 percent in the preceding six months. The company says digital sales increased simply due to a greater public demand for downloads in the UK and US, particularly through iTunes. CD sales still make up 61 percent of EMI's revenues but the company expects this to drop to less than 40 percent in the next five years while digital grows to 30 percent in the same period.
Cost-cutting continue: The 100 million cuts made by EMI after the Maltby acquisitionwhich resulted in 1,500 redundancieshave mostly been completed but the benefits have yet filter through to the results. Another 100 will be cut from the budget this year. The on-going restructuring process cost the company 55 million in the half-year, though will clearly bring costs down in the next set of earnings.
By Patrick Smith