Blog Post

EMI’s Apparent Business Model: Slower Deals, More Returns

EMI, as has been widely reported, needs to make some big changes, and the WSJ has a broad look at the record company’s predicament. EMI chairman Eric Nicoli “has indicated that he will attempt to shift EMI’s focus to marketing its products to consumers, rather than to middlemen like retailers and radio programmers. The idea is to try to open new sales avenues.” There are plenty of restructuring possibilities, too; potential deals with Warner Music and some equity funds in recent years never closed. All but the most frozen-in-time music execs acknowledge that digital formats are the future, and EMI has to stop dragging its heels on such matters. As the WSJ notes, “At a time when it is considered critical for music companies to be nimble, EMI officials changed the protocol for striking digital deals, more than doubling the number of signatures required to as many as a dozen. Digital-media executives who have done business with the company say it can take three weeks for the company to sign a contract after both sides have agreed to its terms. These people say the typical interval is 24 to 48 hours.”
EMI had better hurry up — and it had better stop the age-old practice of shipping more discs than it can sell to temporary inflate sales before the returns start. According to unnamed sources the Journal spoke to, Nora Jones’s new disc “appears poised to become the latest in a recent of string of releases whose shipments have been set up with such thinking in mind. The company shipped at least 1.6 million copies of it to U.S. retailers; if first-week sales match retailers’ estimates of around 400,000, that will be well short of what such a massive initial shipment would normally indicate.”
This can’t go on … although it’s easy to wonder whether someone in the boiler room at EMI is trying to figure out a way to make his numbers by shipping too many files to iTunes. But digital distribution doesn’t work that way, and that’s why EMI has to change or hook up with a partner soon.
Staci adds: One sign of the times: Sir Eric will be a keynote speaker at CTIA’s Orlano conference in late March — as will will Viacom CEO Phillipe Dauman.
EMI Consolidation Continues