EMI Posts Loss, but Outlook
Is Upbeat for Music Industry
Big Gains in Digital Sales
Create Optimism as Decline
In Total Revenue Slows
LONDON -- EMI Group PLC, one of the world's "big four" music companies, reported a net loss for its fiscal first half amid lower sales, but the company is confident about recovery prospects for the global music market.
The London company, which operates record labels including Virgin and Capitol, said sales of digital music more than quadrupled in the first half of its fiscal year. Total music sales continued to fall during the period, but the rate of decline slowed markedly.
EMI Chairman Eric Nicoli said the industrywide 1.3% decline in music sales during the six months represents a "significant improvement" on the 9.6% decline seen in the same period of the previous year. He added that the digital-music market continues to expand rapidly, and "we remain confident that digital represents a key driver for future industry growth."
The upbeat outlook sent EMI's shares higher Friday, as the shares rose 15%, or 31.25 pence (57.76 U.S. cents or 44.56 European cents), to 239.75 pence.
EMI did report weaker results for the period. Its net loss for the six months ended Sept. 30 was £400,000, or about €570,370 ($740,740), compared with a year-earlier net profit of £9.2 million. Sales fell 11% to £851 million from £960.3 million. Adjusted for currency fluctuations, sales were down 5.4%.
EMI said the second half has started well, with a "very successful" October and November boosted by greatest-hits albums from Robbie Williams, Tina Turner and yet another live outing from the Rolling Stones. EMI Music sales for those two months are "well ahead" of last year, the company said.
Digital-music sales of £12.2 million in the first half now represent more than 2% of EMI's total. In a note, brokerage house Bridgewell Securities said it expects digital revenue to reach 25% of the total in three to five years, and said EMI is well exposed to Internet and mobile distribution channels.
On a conference call, Mr. Nicoli said, "We've seen a multiplication of [digital] business for the last four years, but most of the platforms and devices have only just been released."
Mr. Nicoli added that industry campaigns to warn consumers away from illegal digital Internet sites are showing signs of success. "They are having a significant educational and deterrent effect," he said.
EMI also said it remains on track to deliver its promised cost savings of £50 million, split between this financial year and next. EMI in March announced a large restructuring of its labels and artist roster.
