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.