EMI: Don’t Worry, We’ve Got Plenty of Money
by Peter Kafka
Posted on November 7, 2008 at 2:54 PM PT
EMI Music Group PLC, which seems to have been going through a continuous reorg since private equity firm Terra Firma bought it in the summer of 2007, has announced yet another one. Its recorded music division is getting set up into three different silos, the company announced today.
Elio Leoni-Sceti, who heads up the EMI Music unit, explained the overhaul during a staff meeting in London today, and he’ll be embarking on a barnstorming tour to give the same speech at EMI outposts around the world.
But the more important message EMI delivered today was to the company’s investors, who have lent it some $5.8 billion: Don’t worry! We’ve got plenty of cash.
This is good to know, given that EMI has already disclosed that it racked up paper losses of more than $1 billion in 12 months. And there is persistent chatter that the company is strapped for cash and is having a difficult time making debt payments.
Not true, says Leoni-Sceti. “EMI is absolutely not bankrupt, far from it. EMI has never been in such a financially sound situation,” he told the FT. “Terra Firma is a solid financial owner and is committed to this company…and committed to putting in more equity if it is required.” [Emphasis added].
That last part is important, since it suggests that debt service could be an issue for the company–one that could force Terra Firma to inject more cash to keep it afloat. But the company also released a limited set of financials for the recorded music unit (that’s the really troubled part of EMI–its music publishing business is in decent shape), which paint a much rosier picture.
All sums converted from British pounds, for the six-month period ending Sept. 30:
- Revenues: $758 million, flat year-over-year
- Operating cash flow: $314 million
- EBITDA: $93 million
And while physical sales were down three percent (that’s not bad, considering the rest of the industry), digital revenues via outlets like Apple’s (AAPL) iTunes were up 37 percent, the company said.
Comments
The last innovation from the traditional record labels was the DualDisc introduction in 2004. Granted that effort was a disappointment.
Regardless, IMHO the industry needs to invest in more digital media experimentation. I received early review copies of the first DualDiscs and I was optimistic that the format had some potential for growth.
There is still a retail market opportunity for creatively packaged digital media that can compete with online downloads.
Granted, it’s a much smaller niche than the prior music industry model. But, I believe that it’s a profitable niche worthy of further exploration.
David H. Deans
Posted by David H Deans at November 8th, 2008 at 5:22 amGeoBrava Media