More EMI Restructuring

The half-year earnings are up but the restructuring isn’t over at EMI, where recorded music division chief exec Elio Leoni-Sceti is splitting the company into three distinct global business units.

While announcing the label made £59 million (US$ 92.82 million) in the six months to Sept. 30, he unveiled a plan to split the company into three separate units covering new music, catalogue and music services.

The improved figures are before interest, tax, depreciation and amortisation, and compare to the £14 million (US$ 22.02 million) loss the company suffered in the same period last year.

Leoni-Sceti told says EMI Music is, despite the improvement, still in the “very early stages of its renaissance” and the road ahead will not be smooth or easy.

He’s now on a three-week global tour to unveil the new organisational set-up.

EMI Music’s first-half physical recorded global music sales were down 3 percent but fell 12 per cent in the US, but digital sales were up 37 percent to £102 million (US$160.18 million).

Some of the cost cuts Terra Firma implemented since buying EMI a year ago are also starting to impact the balance sheet.

EMI revenues inched higher to £482 million (US$755.47) on the back of the increased digital sales.

Last year EMI Group, which has a £3.7 billion (US$5.79 billion) debt load, had pro forma losses of £757million (US$1,186 million) and incurred £520 million (US$ 815.86 million), but Leoni-Sceti is confident that neither EMI Music nor EMI Music Publishing would report losses in the current year.

He said Terra Firma, Guy Hands’ private equity group, is a solid financial owner, committed to the company and to putting in more equity if it is required.

Not all the experts are convinced and Claire Enders of Enders Analysis told the Financial Times that EMI’s longest-term problem is a creative one.

“If you do not provide attractive new music you cannot generate significant income out of digital downloads and ringtones. Tom Jones and Sarah Brightman are not going to set the world alight,” she explained.

“There is nobody to dispute the company has done the bravest of cost-cutting in the music industry but new music investment is systematically a failure. They can solve every cost problem on earth and they will still have the biggest problem.”

The company says it’s on track in delivering the £200 million (US$313.5 million) of cost cuts. CD returns as a percentage of sales are now below 20 percent, resulting in £50 million (US$78.3 million) of cost savings.