EMI's Loss Raises Concerns On Turnaround Plan
February 2, 2009 at 8:22 AM (PT)
EMI GROUP LTD. reported a first-half loss of £155 million ($221.9 million) FRIDAY as deep cost cuts failed to offset declining CD sales and a large interest bill, reports THE WALL STREET JOURNAL. The British music group's net loss for the six months ended SEPTEMBER 30th narrowed from a £324 million loss in the same half a year earlier, when the company took a £192 million write-down on advances paid to its artists.
While the results are four months old, they suggest that TERRA FIRMA CAPITAL PARTNERS LTD., the private-equity firm run by GUY HANDS that bought EMI in 2007, is struggling to turn the company around. As a private company, EMI isn't required to publish regular earnings reports.
Under TERRA FIRMA's ownership, EMI has reduced marketing spending and has paid musicians smaller advances. Like the entire music industry, it has been hit by piracy, undermining CD sales. The cost cuts are helping to reduce the company's losses, but they also appear to be costing EMI market share, which could make it harder to become profitable over time. EMI's share of global CD sales fell to 9.8% from 10.6% in the half, according to the EMI accounts.
The market share decline "reflects historical problems," the company said in a statement. "It will take some time to see the impact of a rebuilt roster and the full recovery of EMI MUSIC." A spokesman said EMI executives weren't available to comment.