The company’s revenue climbed 7.4 percent in the 12 months ending March 31, the company disclosed (via PaidContent).

The rise is due to increases in both the sale of recorded music and publishing revenue; increases in the former are particularly rare these days. And these numbers ought to bump again in the coming year given that they’ll include dollars/pounds generated by the re-release of the Beatles albums.

Alas, since EMI owner Terra Firma is deep in the midst of negotiations with Citigroup (C), which lent it billions to buy the company, it’s not handing out any other details about the company’s performance, so hard to tell what’s really going on there.

Still, we do know that music has been in decline for a decade, and EMI’s bump up is the first, no matter how modest, in many moons (click on table below to enlarge).

That’s the obvious question in light of news that both Terra Firma, the private equity group that bought EMI in 2007, and Citigroup, which funded most of the transaction, have written down most of their investments in the music company.

This isn’t a surprise–the move has been a long time coming–but it does open the door for Warner, which restructured its debt with an eye toward making such a deal earlier this year.

Pali Research’s Rich Greenfield thinks that Citi (C) will push to break up EMI and sell Warner (WMG) the record music group, which tends to lose money, and keep the music publishing business, which has been a reliable money maker, even during the industry’s 10-year freefall.

But at this point, I don’t know why Warner couldn’t try to swallow the whole thing. In the past, that deal would have been scuttled due to antitrust issues (and in fact, it was), but the music industry is a different beast right now–a sick beast–and I think regulators would be a lot more forgiving this time around.

[Image credit: beggs]

Merrill’s hire in April 2008 was supposed to represent EMI’s willingness to break free from its old CD-based businesses, and a breath of fresh air. Merrill, who had formerly been Google’s (GOOG) CIO, cheerfully admitted that he had no background in the music business.

But it’s not clear what, if anything, Merrill was able to accomplish since he moved to EMI. On the other hand, it’d be hard to imagine any single executive being able to make much impact at EMI or any other label, given the industry’s accelerating decline.

Meanwhile, Guy Hands, the private equity executive whose Terra Firma shop bought EMI in 2007, has had to write off half the value of his investment, and that’s probably an optimistic valuation. And earlier this month Hands himself stepped down from his position as Terra Firma’s CEO.

Here’s the internal announcement from EMI CEO Elio Leoni-Sceti:

From: Internal Communication
Sent: Mon Mar 23 19:31:21 2009
Subject: ORGANISATION ANNOUNCEMENT – from Elio Leoni-Sceti

Dear all

With digital now comprising over 20 per cent of our revenues and growing fast, and with the progress we have made in integrating all of our digital operations fully into the business, we will no longer operate a standalone digital function.

Douglas Merrill has today stepped down from his roles as President of Digital and COO of EMI New Music and will be leaving the company.

I would like to thank Douglas for his contribution and to wish him well for the future.

Digital Marketing

I am delighted to announce that Cory Ondrejka is appointed to the newly-created position of Executive Vice President, Digital Marketing, reporting initially to me and then to our new President of Marketing whose appointment we expect to announce shortly. We have been planning this promotion for Cory for some time now. In his new role he will help us deliver our goal of leveraging the power of digital across our business, particularly in the key areas of consumer understanding and analytics, content creation and digital marketing, in order to strengthen the relationship and interaction between our artists and their fans.

Cory is a highly talented executive with a passion for music and a complementary, technology-based skillset. Since he joined us from Second Life last year he has helped us create a new approach to digital that will be unique to the music industry including establishing a world-class engineering team on the West coast and instituting modern, agile software development practices and tools that are the foundations to help us transform our approach to analytics and marketing.

He will be making further announcements about his Digital Marketing team in due course.

New Music

Nick Gatfield and Billy Mann, our Presidents of A&R Labels for North America/the UK and International respectively, will join the EMI Music Executive Committee and, as members of the New Music Operating Board, will continue to support me directly in my role as President of EMI New Music.

Under their leadership, EMI is building very strong creative momentum. In the last four weeks alone their A&R Labels teams around the world have signed 14 new artists, three in the US, four in the UK and seven in the rest of the world.

Digital Supply Chain/IT

Peter Baker, VP, Digital Software Engineering, and Dan Levine, VP, Digital Product Development, who have been leading the work on our Digital Supply Chain, now report to Ronn Werre, President, EMI Music Services. Ronn will be making the Digital Supply Chain a top priority so that we can best serve our artists and our customers.

Richard Piercy, Acting Chief Information Officer, now reports to Chris Kennedy, our Chief Financial Officer. Richard will continue to oversee our global IT system which is an important strategic enabler and one that is strongly linked to our management and financial reporting requirements. Chris will ensure that IT supports the company’s strategic ambitions effectively and efficiently.

Meanwhile Mark Piibe, in his role as SVP of Digital Business Development, will report to Ronn Werre whose Music Services team now leads all deals and relationships with our digital and physical retail partners.

Building our new music repertoire and embedding digital into everything we do are key to our future success. With our growing creative momentum under strong A&R leadership and the final integration of all remaining digital functions into the business, we have a solid platform for enhanced performance in this coming year.

Thank you for your continued efforts.

All the best
Elio

He’s probably being too conservative.

At least if you use Warner Music Group (WMG) as a comp. Edgar Bronfman Jr.’s music company is (very) roughly the size of Hands’s music company and was forever slated to buy, sell to, or merge with EMI. (In May 2006, EMI was willing to pay $26 a share in cash for Warner, but Bronfman rejected the deal; a year later, EMI rejected a Warner offer.)

Take a look: WMG, currently trading at $1.86 a share, is down 86 percent since Terra Firma bought EMI in August 2007. At what point will Hands have to fess up and take another write-down? (Click chart to enlarge).

Here’s an EMI employee with no complaints about the music business–Norah Jones, whose 2002 debut album was really EMI’s last super-huge success. Those days are gone, but she’s managed to hang on to her money–or at least enough to pay $5 million for a Brooklyn townhouse a couple months ago. Check out this excellent duet with Dolly Parton (yup, that Dolly Parton).

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.

Even people who don’t know anything about the music business know what’s wrong with music business: No one wants to buy music anymore.

Right?

Well, sort of.

While people are buying a lot less music than they used to, they’re still spending a couple billion dollars a year on iTunes from Apple (AAPL) and the like, and many billions more on actual, hold-in-your-hand compact discs.

So in theory, at least, a well-run company should be able to do something with a market that big.

That company, at least for the last several years, has not been EMI Music Group. That’s not just in MediaMemo’s judgment, by the way. That’s the judgment of EMI Music’s owners: The United Kingdom’s Terra Firma private equity group, which bought the company for some $5 billion in the summer of 2007.

Terra Firma’s assessment of the company, delivered via a 101-page annual report, makes for amazing reading. We’ve embedded it below (you’ll need to click on “Full Screen” to make it legible).

But in case you’re time-pressed here’s the executive summary:

• EMI has a relatively valuable publishing company, which administers the copyrights to the underlying compositions to songs. That unit makes money.
• EMI also owns a valuable catalog of song recordings. That unit could make money, but it’s all being eaten up by the group that burns money by signing and recording artists who make new recordings that no one wants to buy.
• Terra Firma knew EMI was badly run when it bought it, but it didn’t really know how badly run it was until it owned it. It figured, for instance, that there was a lot of waste at the company. But it had no idea the U.K. division was spending $1.1 million a year on a London taxi service. And it had literally no idea how much money some of EMI’s executives were making, because EMI wouldn’t disclose that during due diligence.

This last part is crucial for EMI’s future because the people who funded the deal last year–Terra Firma’s investors, as well as Citigroup (C), which provided the debt financing–need to be convinced that the people who didn’t understand what they’d bought last year are the people who should be trusted to turn it around.

But that’s a question for later. For now, if you want to see how a music company managed to lose $1.17 billion in 12 months, this is the document for you:

EMI report – Get more Business Documents

[Image Credit: Lorelei]