New report: EMI lost $1.2 billion, revenue declined
To paraphrase one of its late great former acts, when EMI was 77, it wasn’t a very good year.
According to new figures just released, the underdog of the four major labels suffered losses of $1.2 billion in the financial year ended March 31, far deeper than the prior year’s $455 million. Revenue declined to $2.3 billion from $2.8 billion.
The report came from Maltby Capital, owned by funds managed by Guy Hands' private equity firm Terra Firma, which purchased EMI -- home of Katy Perry and Coldplay -- last year.
The loss stems from “poor" operational performance, according to the company, which cites in particular a high-spending culture (including high executive salaries), overly traditional artist relationships and poor reporting of data related to artist profitability.
Those practices meant that, despite EMI’s strong artist roster and well-performing publishing business, the company finances suffered. EMI lost its third-place rank among the labels to Warner Music Group in 2006. Physical CD sales for the label fell 45% from 2005 to 2007, the report notes, even though the average market decline was 19%. Also, the label’s digital music revenue has had slower growth than the industry overall.
“EMI Music had a history of signing great artists but had not adapted sufficiently to the changing consumer market for music,” the report states.
And, the report suggests, the company may not see solid returns from signing those great artists, either. The report notes that EMI artists’ marketing and production budgets generously estimate likely sales. In the end, marketing and production eat up on average 81% of sales; nearly 9 in 10 EMI artists aren’t profitable.
Still, the report states that a change in strategy and operations, pursued out of the public-company spotlight, could turn the company around, if slowly.
“[T]here should be no false expectations,” the report reads. “EMI cannot be turned around overnight.”
EMI spokesman Neil Bennett noted also that since the end of the financial year, much of EMI's restructuring has moved forward.
"An awful lot has happened since then," he says. "EMI is a company going through radical change."
*Photo: Katy Perry. Credit: Kevin Winter/Getty Images