Improving EMI Says Digital Music Is Over-Inflated, Too Reliant On iTunes

EMI again isn’t detailing how much money it’s making from digital in latest earnings, but it is saying estimates for digital growth were too high and labels must ween themselves off iTunes Store…

“As a result of the global economic slowdown, and the uncertainty and general reduction to the current market estimates of the growth of the digital and on-line music markets, and the continuing rapid decline of the physical market, the directors have concluded there was sufficient doubt over the recoverability of the carrying value of certain intangible assets to warrant an impairment review of the music catalogues”. The write-off for 2009/10 is £602 million.

“EMI Music continued to be challenged by the overall decline in physical sales, which has not yet been fully offset by growth in digital sales.”

EMI does say, in its Music Publishing division (for licensing songs to users like TV shows), digital grew from 7.4 percent to 8.1 percent of revenue.

Under “risks”, EMI lists: “The substantial dependence on a limited number of online music stores, in particular the iTunes Store, for the online sale of music recordings, and the resultant significant influence that they can exert over the pricing structure for online music stores.”

Even after a recent emergency refinancing, EMI still has £3 billion debt outstanding. It warns it will fall short of banking covenants until 2015. But full-year financials show company fundamentals doing slightly better now…

Sales from the Recorded Music division (ie. people buying music) are up 6.5 percent, and from the Music Publishing division are up 2.1 percent.

Company post-tax loss is reduced from last year’s £1.5 billion to £512 million, on 5.2 percent better revenue of £1.6 billion.