What Next for EMI?

EMI look like they have found a buyer. Iím no financial analyst so Iím not even going to attempt to say whether it is a good deal or not for EMI or the buyer. However from an industry perspective this does have the important distinction of reducing industry consolidation (or at least delaying it) by the mere fact of the buyer not being WMG. Of course the prospective buyers could simply buy and then sell onto WMG at a later date for a premium, and WMG could yet end up buying them directly. If EMI did end up hooked up with WMG there would be significant disquiet from the indie sector, much of whom who say the trend of major label consolidation as a major (no pun intended) threat to their businesses. It would also prick the interest of the EU.

However, despite the monopolistic implications of further consolidation, there is no getting away from the fact that the music industry is contracting and will continue to do so for some time yet. So labels need to work out how to do business more effectively and more efficiently. Joining forces is one tactic to implement that strategy.

The market will turn around though and digital will eventually offset physical declines, but not quite yet. EMIís early results show that digital growth (79.7 percent) was not enough to counter balance the decline in physical sales (11.8 percent) and that total sales declined by 8.8 percent.

Of course EMI is not all about recorded music. In fact EMI publishing is arguably the robust part of the business. There are rumours that the two divisions could be broken up and EMI recorded music sold onto WMG. That would be a missed opportunity. The bigger trend of the music industry is the lessening importance of the CD as the bed rock of revenues. Synch revenues are finding an ever growing number of digital and traditional outlets. A joint music publishing and recorded music outfit has increased ability to compete across all evolving revenue streams.

A final potential twist is the question of what will happen to EMIís DRM free initiative if EMI music got sold to WMG. It is possible that it might get reversed. It would be a shame if that happened. Digital music needs DRM free as part of the online mix. EMI have been brave enough to put the first foot forward, now there is the waiting game to see whether any others feel compelled to follow suit. The industry needs brave moves such as EMIísÖeven if it was forced by necessity rather than choice.