EMI (recorded music division) for sale?
Posted: Wed Feb 21, 2007 9:14 am
EMI mulls music division spin-off
James Robinson and Richard Wachman
Sunday February 18, 2007
The Observer
EMI may sell or demerge its recorded music division as part of a radical overhaul of the business designed to reverse falling profits. Sources close to the company, which has issued two profit warnings in a month, say the plan is being given serious consideration by the board as it attempts to cut costs and boost its share price.
A sale would leave EMI with its more profitable music publishing arm, which owns the copyright to more than 1 million songs recorded by artists including Sting, Aerosmith and Jay-Z.
The recorded music arm has been hit by disappointing CD sales in the US, and the growth of downloading. Although most major record companies have embraced digital sales, revenues are not expected to compensate for a fall in CD sales for many years.
Chief executive Eric Nicoli, who is now fighting for his job, blamed its poor performance for the warnings, the second of which prompted a 12 per cent fall in its share price last week.
The recorded music business can be lucrative but it is notoriously unpredictable. EMI had pinned its hopes on new releases from Robbie Williams and Janet Jackson, but they did not sell as well as it expected. The fact that the division's sale is under serious consideration shows the extent of the group's problems.
It forms part of a four-point plan to reverse falling profits at the group, which was announced last month following a first profit warning. Nicoli fired Alain Levy as head of recorded music following the warning and stepped into the role himself, although some EMI shareholders questioned the wisdom of the move.
Sources claim the plan, designed to save £110m a year, is more far-reaching than the City realises.It also includes dramatically reducing the size of its US business, pulling out of foreign markets and pursuing a more aggressive digital strategy. The business will be refocused to reflect new industry realities, according to sources.
Permira made a 320p-per-share offer for EMI last summer. The offer was rejected after Nicoli claimed the business was poised for growth, but EMI's shares closed at 221p on Friday.
Shareholders are expected to tell EMI's new chairman, John Gildersleeve, to find a new chief executive when they meet him in the coming weeks.
James Robinson and Richard Wachman
Sunday February 18, 2007
The Observer
EMI may sell or demerge its recorded music division as part of a radical overhaul of the business designed to reverse falling profits. Sources close to the company, which has issued two profit warnings in a month, say the plan is being given serious consideration by the board as it attempts to cut costs and boost its share price.
A sale would leave EMI with its more profitable music publishing arm, which owns the copyright to more than 1 million songs recorded by artists including Sting, Aerosmith and Jay-Z.
The recorded music arm has been hit by disappointing CD sales in the US, and the growth of downloading. Although most major record companies have embraced digital sales, revenues are not expected to compensate for a fall in CD sales for many years.
Chief executive Eric Nicoli, who is now fighting for his job, blamed its poor performance for the warnings, the second of which prompted a 12 per cent fall in its share price last week.
The recorded music business can be lucrative but it is notoriously unpredictable. EMI had pinned its hopes on new releases from Robbie Williams and Janet Jackson, but they did not sell as well as it expected. The fact that the division's sale is under serious consideration shows the extent of the group's problems.
It forms part of a four-point plan to reverse falling profits at the group, which was announced last month following a first profit warning. Nicoli fired Alain Levy as head of recorded music following the warning and stepped into the role himself, although some EMI shareholders questioned the wisdom of the move.
Sources claim the plan, designed to save £110m a year, is more far-reaching than the City realises.It also includes dramatically reducing the size of its US business, pulling out of foreign markets and pursuing a more aggressive digital strategy. The business will be refocused to reflect new industry realities, according to sources.
Permira made a 320p-per-share offer for EMI last summer. The offer was rejected after Nicoli claimed the business was poised for growth, but EMI's shares closed at 221p on Friday.
Shareholders are expected to tell EMI's new chairman, John Gildersleeve, to find a new chief executive when they meet him in the coming weeks.