RSSCan DRM-Free MP3 Tracks Bail Out EMI Music?
By Scott M. Fulton, III | Published August 6, 2007, 5:28 PM
The first real test of the viability of DRM-free music sales came this past quarter, as investors monitored whether EMI Music's recent arrangements with Apple and Amazon to sell unlocked tracks on their services at a premium, would lift the publisher out of its financial doldrums. The news this quarter is mixed: While the reaction to the move appears strongly positive from consumers, the publisher's conventional businesses are sinking at too fast a rate.
In its preliminary quarterly report issued this morning, EMI Music said that revenues from digital music sales increased 26% over the previous quarter, while revenue from its physical music sales declined by 19.8%. If that were the final score, it would sound like a win for digital. It's not, since physical sales constitutes a greater share of the overall business: After adjusting for inflation, EMI Music's total revenues declined by 5.1%.
About the publisher's prospects from its deal with iTunes, its only comment today was, "Early revenue indications for this initiative are encouraging."
Since this was just a preliminary report, we don't know yet the final adjusted revenues figures, nor the publisher's profit numbers. But for the last fiscal year which ended in March, it declared a loss of ?263.6 million after taxes, on revenue of ?1.75 billion. The publisher may be glad it's already reached a cash buyout offer from investment group Maltby Ltd.; if it had waited any longer, that offer could have been lower.
While European investors appear to agree at least on the "glass is half-empty/half-full" part of the theory, there seems to be debate today over which part of the glass is more important long-term. The CD is dying as a retail commodity, proclaims the Internet-savvy side of the argument, and the fact that EMI's general publishing revenue is higher this quarter stands as proof that this fact won't necessarily sink the music business.
But CDs represent products, argues the reverse side, and the Internet value of songs a la carte is not substantiated by the absence of CDs ("albums") as a promotional tool. In other words, if the CD dies, the bottom could drop out from under online sales.
When the buyout deal was announced last March, the Financial Times commented that EMI Music could conceivably benefit from private ownership. Its theory was that without pressure from public investors to keep digital sales up, it could go back to concentrating on shoring up the foundation of its business -- albums -- to the eventual benefit of all the company's divisions.
That way, the theory continues, the publisher could eventually sell its physical music publishing division, perhaps to rival Warner Music Group, in time to shift its focus back to digital publishing once the CD truly is dead on the vine. The little matter of which group would own the artists' contracts "for all media, foreign and domestic," was not touched upon.
It's great that EMI has begun to respond to consumers. However, this may be a case of a dollar short and a day late. If they still see CDs as products but don't see their digital catalog as products, they're in bigger trouble than low revenue. I wonder if this is the kind of argument put forth by people who made carriage wheels for a living right after cars came into being. Smart business leaders respond quickly to changing consumer demand, and most music publishers have fought their customers for over 7 years now on this issue. It's been 6 years since I purchased a new CD of any kind, but publishers haven't gotten the memo on that. They seem to assume that people like me are part of a radical and dishonest fringe. The truth is that while I want to be legal, I also don't want to be gouged on price. Therefore, I don't buy CDs. I buy digital music a track at a time, or I legally buy used CDs or swap them on http://www.swapacd.com . As long as they cling to the CD as a mainstay product to keep them in business, they will go under. In the world of business, it's change or die, unless they can convince their government to bail them out like the railroads have in the United States.
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"They seem to assume that people like me are part of a radical and dishonest fringe. The truth is that while I want to be legal, I also don't want to be gouged on price. Therefore, I don't buy CDs."
Thats what I wanted to say only you said it better !!! lol
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It would be a shame if EMI went down.
They're one of the few who listen to what the consumer wants.
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I agree it would be a shame, but I also feel that they should have listened a bit more... Way back in the day when Napster first came out the record companies should have perked up and said "hmmmm medium free distribution method with near zero cost to us... charge 50 cents a track and we can make more money then we ever did before" I still believe people would willingly buy music online and burn there own CD's but even at 1$ a track thats kinda pricey for some of the older stuff (the new stuff sure ok I can see it) but come on I feel like im getting ripped off when I buy something like AC/DC's Dirty Deeds Done Dirt cheap for $9.95...a DVD movie from the same time period at the exact same store in a nicer box... $5.95 :( thats a travesty lol BTW I know not if EMI produces AC/DC but the deal is the same no matter who the label is :(
I guess in the end what im saying is people dont want to feel like a criminal and steal/download music but at the same time would you rather be called a thief or a mark ? I know I would rather be the person doing the stealing then the person being robbed.... (I know its just music and no one requires it so the price is just subjective and one person who thinks something is cheap another person may think is too expensive, art it is lol)
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