New artists, cost cuts and digital growth cheer EMI

EMI overcame an 11.4 per cent fall in sales to deliver increased profits and margins in the six months to the end of September, it announced yesterday.

EMI overcame an 11.4 per cent fall in sales to deliver increased profits and margins in the six months to the end of September, it announced yesterday.

With releases in its second half from Robbie Williams and newer artists such as Chingy and Perfect Circle, the company said turnover for October and November was well ahead of last year and that it had maintained its market share.

Other new releases include a greatest hits collection from Tina Turner and a live album from the Rolling Stones. Eric Nicoli, the EMI chairman, said: "It's important not to be smug but I think nobody imagined that with the kind of sales declines that are inevitable, given the shape of our release schedule and the currency hit, that we could deliver profit and margin improvements."

Headline sales were down from £960.3m to £851m for the half-year. However, stripping out the negative effects of a weakening dollar, turnover was down 5.4 per cent.

Ignoring currency movements, operating profit was up 8.1 per cent to £80.1m and pre-tax profits rose 9 per cent to £39.8m. Another positive development for EMI was the growth of digital music sales, which includes people downloading music files over the internet and mobile phone ringtones.

EMI said group digital sales rose fourfold. "You don't have to multiply that many times before it becomes a significant share of the total. Eventually we think digital music sales in all their forms could account for 25 per cent of the music industry," Mr Nicoli said.

Over the past two years, EMI has been shrinking its business as the music industry has been hit by a sales slump caused partly by piracy and illegal downloads but also because release schedules across the industry have been poor.

The big record companies have been refocusing their rosters on fewer artists which they believe have a chance of achieving a longer shelf-life and slashing costs.

"When you take 2,000 people out of your business you will inevitably have fixed cost reductions. But the other element is efficiency improvements. We had 2 per cent gross margin improvement in recorded music. That's managing the variable cost line more efficiently. That's where people underestimated us," Mr Nicoli said.

The company has embarked on an efficiency drive centred on its marketing spend. "This wasn't mindless cutting of the marketing budget but being more thoughtful about the way we invest and making use of better information systems and being more responsive to what's happening in the market," Mr Nicoli said. "We could have released Robbie Williams in September, not October, but to do so would have meant marketing it twice; once for the launch and then again for Christmas."

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