Multimedia Industry: Case Study of EMI Records

EMI Records is a reputed music production and distribution company. It is distinct from others in the music industry from the fact that it always puts the prospects of the artist ahead of the commercial return on the art. Such popular artists as Iron Maiden, Pink Floyd, Kate Bush and Robbie Williams have had a long-term business relationship with the company. To this day, it remains a dynamic and innovative label committed to recognizing and supporting fresh musical talent in Europe and America. Eicom’s business is also music based but their focus is on the distribution through television channels. Hence, Eicom and EMI records compete in different markets although they both represent the multimedia industry. The company is in a phase of transformation with the prevalence these days of downloadable music off the internet. EMI is conceiving of a fair and sustainable online business model that will return rich rewards to artists and the label.

Financial Performance:

An overview of the company’s performance over the last five years reveals some interesting trends. The annual turnover has declined from 2,672,700 pounds in 2001 to 1,942,800 pounds in 2006. This decline is attributable to the unregulated growth of illegal downloads through the internet. This assertion is supported by the fact that other performance indicators such as Operating assets and Earnings per share have also declined proportionate to the decline in the annual turnover. The Earnings per share had plummeted form 10.1pence to 7.2 pence over the last five years. The multimedia company’s revenue from music copyrights fell form 61,000 pounds to 33,200 pounds in the last five years. The company’s Chairman and CEO Martin Bandier give the following rationale for the dip in profits:
“Mechanical royalties, derived primarily from the sales of recorded music products, now represents less than 45% of our total publishing revenues, down from over 56% of the total five years ago. Mechanical revenues declined by 6.3% at constant currency for the year. Given the time lag in receiving royalties from collection societies, mechanical revenues were negatively affected by the prior period’s decline in the global recorded music market and the phasing of receipts.” (Annual Report 2005-2006).

Challenges facing EMI:

With the governments across the world under increasing pressure to chart policies to curb this trend, a reversal of fortunes for the music industry can be expected. Having stated that, regulating the usage of Internet brings with it unprecedented geo-political and technical challenges. It remains to be seen, if the internet could be tamed for legitimate commercial transactions. What can be done to remedy the situation? There is only one solution – EMI has to reinvent its brand to suit the changing nature of the music and multimedia industry. Looking back at some of the decisions by its management, an aversion to risk-taking is evident. But now that the conservative approach had failed to deliver financial returns, the company finds itself in a hole. To negate this predicament the company has to adopt a policy of “educated risk-taking”. A similarity could be drawn between Electric Word and EMI Records in their sluggishness in venturing into the online market.

Strong Fundamentals:

EMI’s fundamentals are quite strong. It offers a broad range of music genres (both past and present) to its consumers. Some of their prominent artists include Natasha Bedingfield, Kylie Minogue, Eminem, Jessica Simpson, Alicia Keys and Pharrell Williams. The multimedia company’s marketing strategy is also strong. By continuing to concentrate on improving the overall efficiency at all levels and a more aggressive defence of copyright laws, the company can off-set some of the losses that are inevitable due to prevailing market conditions.

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