EMI Loses $1.2 Billion For Year
October 24, 2008 at 2:22 PM (PT)
EMI took it on the chin to the tune of a £757 million ($1.22 billion) loss for the year ended March 31st. MALTBY CAPITAL Chairman JOHN BIRT blamed accounting factors and the previous management's "continued operational poor performance" for the painful results, reports VARIETY and THE LONDON TIMES.
While revenues of $265 million represented a rather mild 5% decline from the previous year, a variety of charges overwhelmed that revenue, such as $841.4 million of net financing costs, $199 million restructuring costs and $176.4 million in depreciation and $310.7 million to revalue the balance sheet.
The silver lining, as it were, came from EMI MUSIC PUBLISHING, whose revenues increased 2% to $665 million. Unfortunately, EMI MUSIC's revenues fell 23% to $1.69 billion.
BIRT sent out an uncharacteristically blunt letter to stakeholders, where he specifically called out the problems. "Firstly, EMI Music had a culture where high expenditure at odds with the challenges it faced was widely accepted," he wrote. "This meant the company accepted as normal costs that which should have been substantially cut back.
"Secondly, EMI MUSIC's traditional way of working with artists -- highly successful in the days of booming CD sales and a significantly simpler and less fragmented market -- had become less fit for purpose. As a result, EMI MUSIC's creative performance, as well as its financial performance, had begun to slide.
"Thirdly, the company's internal reporting, while data-rich, focused on traditional measures which could tell the company little about the major changes in its marketplace as they evolved. It provided insufficient information for fundamental metrics -- such as artist profitability."
BIRT expects the new management team to help EMI Group turn the corner by the time an interim six-month report is released, yet he's cognizant of the task at hand. "This is the first year in the radical turnaround of a company culture, a business model and perhaps even a market. It will not be a quick fix."