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Summary:

EMI again isn’t detailing how much money it’s making from digital in latest earnings, but it is saying estimates for digital growth were too…

Bat For Lashes
photo: David Shankbone

EMI again isn’t detailing how much money it’s making from digital in latest earnings, but it is saying estimates for digital growth were too high and labels must ween themselves off iTunes Store…

“As a result of the global economic slowdown, and the uncertainty and general reduction to the current market estimates of the growth of the digital and on-line music markets, and the continuing rapid decline of the physical market, the directors have concluded there was sufficient doubt over the recoverability of the carrying value of certain intangible assets to warrant an impairment review of the music catalogues”. The write-off for 2009/10 is £602 million.

“EMI Music continued to be challenged by the overall decline in physical sales, which has not yet been fully offset by growth in digital sales.”

EMI does say, in its Music Publishing division (for licensing songs to users like TV shows), digital grew from 7.4 percent to 8.1 percent of revenue.

Under “risks”, EMI lists: “The substantial dependence on a limited number of online music stores, in particular the iTunes Store, for the online sale of music recordings, and the resultant significant influence that they can exert over the pricing structure for online music stores.”

Even after a recent emergency refinancing, EMI still has £3 billion debt outstanding. It warns it will fall short of banking covenants until 2015. But full-year financials show company fundamentals doing slightly better now…

Sales from the Recorded Music division (ie. people buying music) are up 6.5 percent, and from the Music Publishing division are up 2.1 percent.

Company post-tax loss is reduced from last year’s £1.5 billion to £512 million, on 5.2 percent better revenue of £1.6 billion.

  1. I love how they still think that the loss of physical sales bloat will someday be offset by digital sales bloat. This is the new normal, geniuses.

  2. Now I know why EMI is in such dire straits: they can’t even think or speak in a coherent manner! For starters, they blame the economy. Then they unleash such double speak like “uncertainty and general reduction to the current market estimates of the growth of the digital and on-line music markets” and “the continuing rapid decline of the physical market,” and “there was sufficient doubt over the recoverability of the carrying value of certain intangible assets to warrant an impairment review of the music catalogues.” What the hell did they just say? Here’s my translation: Look guys, we don’t know how to make money anymore. We’re losing big time. We need help but we’re too stupid to figure out that the business model that we’ve used for the last few decades is broken and well let’s blame everybody else for our problems. Let’s start with the economy and blame the iTunes Store, too. Damn that iTunes Store, they’re controlling everything!

  3. Here’s another translation. We used to think digital sales would make up for the decline in physical sales. Now we know that isn’t the case. (That’s what all that stuff about “reduction to the current market estimates” means.) Therefore, we thought it would be a good idea to reconsider the value of the music we own. (That’s what “the directors have concluded…music catalogues” means.) They obviously decided that their “intangible assets,” meaning the music rights, are worth 602 million pounds less than they used to think. I don’t know if that’s the right amount, but I think we all could agree that EMI is totally facing reality when they admit that they are going to make a lot less money than they used to.

    Is iTunes a risk to their future profits? You bet. Check out this cnet story: http://www.cnn.com/2010/TECH/biztech/05/27/cnet.itunes.apple/index.html
    iTunes has 70% of the digital market, which is 28% of the total market. They certainly are in a position to push around any of the major labels and if you talk to anybody at a major label, perhaps you know that they definitely do.

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