What Next for EMI?

Mark Mulligan | August 02, 2007, 06:05 AM

I’ve held off from commenting on the speculation to date but finally Terra Firma’s bid for EMI has been accepted by the majority of the shareholders so the deal looks set to go through.

There are still a few rumours doing the rounds on Terra Firma’s intentions but I’ll skip speculating on those.

So what does Terra Firma need to do to make a success of EMI? Well the key issues that EMI have faced are:

• Competition from other media (DVDs, console games etc)
• Competition from piracy (online and physical)
• A weak US footprint
• No parent company group to leverage for cross promotion and distribution

The first two are broader music industry trends that Terra Firma can do little meaningful to address, the third Terra Firma organizational structure isn’t going to solve and the final one EMI has been trying to tackle for years without success, so it’ll require something spectacular to solve.

So what can EMI do? Well continuing to aggressively pursue digital strategies is at the core. Strong iTunes download rates suggest some long overdue momentum in the digital market but it is still heavily skewed towards singles. EMI (and the other labels) need to aggressively incentivise consumers to buy albums. That means making them significantly cheaper than a CD on Amazon (digital is an inherently inferior product after all). This requires some brave licensing initiatives with the retailers. Once that strategy is in place the orders of magnitude of download revenues will augment strongly. It won’t be a like for like increase, but it will be sizeable. And EMI and their peers need to act quickly, before singles usage behaviour becomes permanently etched into digital music behaviour. Perhaps it already is?