Cd/EMI industry and My future predictions

By: Stephen Brown

Table of Contents
Chapters Page
Chapter-1 Introduction pgs 1-2
Chapter-2 History and changes of EMI pgs 2-4
Chapter-3 History of Music Industry pgs 4-6
Chapter-4 Negative effects on Music Industry (past and present) pgs 6-8
Chapter-5 Conclusion pg 8
References pg 9

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In recent years and in the past there have been constant changes in the selling of music cds by corporations within the industry. Over the years many different situations have caused music corporations abroad to be faced with negative results and now just as before new problems exist which must be analyzed and corrected or the industry will suffer. In the nineties events such as mega retailers undercutting prices of the industry contributed to what was considered as the major music selling problems them. Within the last several years until now, factors such as file sharing and lower value ratings on music have caused today’s situation to reach levels of disaster far worst then in the past. (Music Cd Industry)
To have an interpretation of the outcome of the music industry one must look to the past and present for the answers. EMI group is one of the biggest names in the music industry, are associated with more than thirty record labels; some of the bigger names such as Capital and Virgin; housed some of the most known names in music such as the Beatles, Pink Floyd, and Diana Ross, and they own their fair share of the music market and possessing all of these qualities gives them access as being one of the Big Four, which are the four largest record companies in the world. You would think with all of this they would never have to worry about problems a day in there life but nothing in this world is invulnerable and this is proven with the now shaky looking super music corporation. Depending on their actions within the next five years rest the fate of the multi-international, world renowned music giant, but I believe this might be
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an unrelenting battle no matter what. What I attempt to prove is that the outcome of the music industry isn’t in my forecast to do well in the immediate future with support of many different factors involved in the equation. (Wikipedia) EMI Group is a British music company made up of major record company EMI Music. EMI Music is based in Kensington in London, England and its publishing company: which is EMI Music Publishing; is based in New York. EMI Music is a giant within the music industry and with its high status and production rate it gains entry into the Big Four. The Big Four consist of the four major music companies of Sony BMG, Universal, Warner, and EMI. In its early life EMI established subsidiary operations in a number of countries, few which are India, Australia, and New Zealand. From the 1920’s to the 1960’s EMI’s Australian and New Zealand subsidiaries dominated the popular music industries of their respective countries; but when locally owned labels such as Festival Records sprang up WMI began to be challenged. EMI Music was founded in 1931 and opened the soon to be legendary recording studios at Abbey Road, London. From the beginning this company scoped great talent and brought them in and this is shown between the 1930’s and 1940’s when they had Arturo, Toscanini, Sir Edward Elgar, and many other great artist on their rooster. In this time they also began to appoint A & R managers like George Martin who reeled in the Beatles. Their first LP’s were released in 1952 and their first stereophonic recordings in 1955. In 1957 WMI entered the American Market by acquiring 96% of the stock of Capitol Records which was to replace the loss of its long-established licensing arrangements with RCA Victor and Columbia Records. (Wikipedia)

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Form 1960 to 1995 EMI Music’s headquarters was at 20 Manchester Square whose stairwell appeared on the Beatles “Please Please Me” album. The classical artists they possessed were limited to British orchestras, such as the Philharmonic Orchestra because few U.S. orchestras signed with them during the LP era. During the late 1950’s, 1960’s, and early 1970’s the company enjoyed huge success in the popular music field under the management of Sir Joseph Lockwood. Because of groups and solo artists which included The Beatles, The Beach Boys, The Hollies, Cilla Black, and Pink Floyd signing to EMI and its subsidiary labels, EMI became the best known and most successful recording company in the world at that time. By 1967 EMI converted HMV to an all classical music label and shifted its pop music artists to Columbia and in 1969 EMI established Harvest records, which signed groups in the emerging progressive rock genre. In February 1979, EMI Ltd., which was formerly Electric & Musical Industries but changed in 1971, acquired United Artists Records and with it Liberty Records. In October of 1979 Thorn Electrical Industries merged with EMI Ltd. To form Thorn EMI and in one of its highest-profile and most expensive acquisitions, it took over Richard Branson’s Virgin Records in 1992. On August 16, 1996, Thorn EMI shareholders voted in favor of demerger proposals and the resulting media company was known by the name EMI Group Plc., which is the existing company we know of today. Since August 2007, EMI has been owned by Terra Firma Capital Partners who bought it for £3.2 billion. This occurred after a dramatic decline in sales and the announcement that EMI had sustained a loss of £240 million in 2006/2007. (Wikipedia) Some legal bouts that EMI has been faced with are the 2005 suit filed by Apple Records. This record label representing the Beatles alleges in their suit December 15, 2005 that EMI
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withheld $ 50 million from the record label. An EMI spokesman noted that audits of record label accounts are not unusual, confirming that at least two hundred such audits have been performed, but also stated that they rarely result in legal action. This suit was settled with undisclosed terms on April 12, 2007. (Wikipedia) Another case was when the FTC stepped in and charged the companies of the formerly Big Five of overpricing consumers by having them overpay by $ 500 million for a three year period. This was done with there created program known as MAP (minimum advertised price). The companies of the Big Five, which included Universal Music and Video Distribution, Sony Corp. of America, Time Warner Incorporated, EMI Music Distribution, and BMG, were alleged by the FTC to have set conditions on advertising dollars to induce retailers to charge consumers higher cd prices, allowing the distributors to bump up their prices. The alleged MAP conduct violated sections 5 of the FTC Act, and they stated “The MAP programs were implemented with an anticompetitive intent and they had anticompetitive effects.” The commission was reluctant to go with per se unlawful minimum RPM (resale price maintenance) charges since retailers were theoretically free to sell at any price as long as they didn’t advertise discounted prices. (FTC) From 1984-1994 there was a 122.6% increase in consumers spending per average person or recorded music in America. The reason for this change was linked to the technology structure so prevalent in the music industry. More and more people became enticed by the attribute of portable music, which gave them the comfort of not having to leave their homes to enjoy it. The technology and advancements in music also provided people with the luxury of instant gratification. Cds dramatically replaced cassettes when 333.1 million units sold in 1991 in America became 727.6 million units in 1995. Meanwhile sales of cassettes fell from 360.1
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million in 1991 to 272.6 million units in 1995. With all the changes occurring, the music recording industry had to adapt and change its structure as well. Large entertainment conglomerates took over on an international scale by acquiring different branches of the entire entertainment industry such as film, television, electronics, recordings, music publishing, record labels, and even retail chains. Since music infused itself into every major entertainment sector form film, to radio, and TV, these entertainment conglomerates were interested in owning the major components of the music supply chain such as publishing, manufacturing, and distribution. These entertainment conglomerates sprang up all over the world and make up today what we now know as the Big Four. Although the focus of the industry began in the U.S., where entertainment was a global leader, the industries began to spread around the world, finding untouched areas to in filtrate their knowledge, power, network, structure and expertise. (Music Cd Industry) Rock music dominated the music industry in the U.S. with over 50% of shipment in the mid 1980’s, but it began to equalize with other genres, drooping to about 34% in 1995. This was caused by more music genres infiltrating the market such as women groups, R &B groups, pop/rocks bands, country music, and international beats. As genres expanded so did the preferences of consumers for the location of sales. This diversified the possibilities of the distributing sector of the music industry supply chain. Consumers began to shop indifferent locations for their convenience or to find more selective music needs then that offered by the larger retail stores which concluded to people looking in smaller specialized stores for what they needed. Record clubs became popular and help distributors profit by narrowing the supply chain. This also helped them by eliminating the retail stores and offering discounts to the public
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while still making mass amounts of profit. When the internet came into play it offered a line of distribution that opened the market beyond a set boundary. Although new technologies presented a potential threat to EMI and other companies of the Big Four, they have some closure in the fact that they own most of the entertainment industry. For this reason they believe that any changes would actually be more beneficial to them. A problem that the music industry could face form this is if they can’t find a way to control the piracy within the internet. But I believe cd sales will still continue to diminish. (Music CD Industry) There have been many different problems over the years within the music industry which have plagued music companies over the years. In the nineties when cds first replaced tapes, bargain retailers began selling cds much under-price from what was good for the industry which was good for consumers but not the industry. (FTBE) Within that time period at least 1000 record shops closed and several chains filed for bankruptcy protection. This is also when more one hit wonders made a splash in the business and contributed to big named artist not getting an expected amount of sales. EMI sales also slipped during this time and the company was speculated to be up for bidding. (Music CD Industry) In 2007 there was a previous seven-year consistent decline in cd sales that battered the music industry. For the first three months of 2007 the sales plunged 20% from the year before. From this information we can see that consumers are acquiring music in different ways and in a hefty amount. Although sales were dropping cds still accounted for 85% of music sold. The demise of specialty music retailers like longtime music business Tower Records proves that cds weren’t moving the way they used to. About 800 music stores; including Tower’s 89 locations;
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closed in 2006 alone. The sell of about 100 million iPods sold by Apple shows that music remains a powerful force, but because of the internet consumers have more ways to obtain music now that they did ten years ago when stores were the only was of doing so. Any type of song, whether it is the most popular to lesser-known types, can be easily found online legally or in pirated forms. Of course the music industry would like for songs to be purchased legally, it’s just too easy to get them for free from other sources. Jeff Rabhan, who manages artist and producers, said “Sales are so down and off that, as a manager, I look at a cd as a part of the marketing of an artist, more than as an income stream. It’s the vehicle that drive the tour, the merchandise, building the brand, and that’s it. There’s no money.” A statement like that coming from a well known manager gives the thought to a very dark future for cds. In the beginning of 2007 he music industry posted some of the weakest sales it has ever recorded, and also seen the two lowest-selling No. 1 albums since Nielson SoundScan, which tracks music sales, was launched in 1991. In prior years it wasn’t uncommon for a No. 1 record to sell between 500,000 and 600,000 copies, but one week Chris Daughtry’s rock band sold 65,000 copies of their chart-topping album and in another week the Oscar award winning film “Dreamgirl’s”; which was a musical; movie soundtrack sold only 60,000 copies. Music industries like EMI have been counting on digital music sales to help balance there loss of cd sales but it hasn’t worked out that way, or at least not so far. For the beginning of 2007 digital music sales rose 54% from its previous year but didn’t account for the 20% drop in music. While this still isn’t enough illegal file sharing networks trade one billion songs a month, according to Big Champagne LLC. As in the past retailers such as Wal-Mart and Best Buy aren’t helping the current crisis cds face. They are still undercutting the main chains of music like EMI and taking would be sales away form
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them. Music distribution executives estimate that such mega retailers as of last year represented 65% of the music retail market which is up 20% form a decade before that. (Sales of Music) Based on the information I received from my research I must say that I believe the cd industry doesn’t have a bright future. I don’t think cds will ever totally go away, at least not anytime soon, but I don’t think that there can be anything done to revive the decline in sales. The problems early music industry faced weren’t as dire as today because there wasn’t the mass amount of music being accessed for free which I think is really concluding to the high declines. Even though people don’t value artist as they used to or think music is as good as it used to be, I don’t think those factors affect the industry as much as piracy. In the long run I’m sure that the industry will survive in whole but the future of cds in my mind will be outlived by the new technologies existing or that will be created. Since EMI has much invested in music I don’t believe that they will allow this problem to bring them down but if they don’t continue to move with the time fast enough or keep coming up with new technology for years to come they could be in danger, especially with being the smallest of the Big Four now. I believe they’ll figure it out because that’s all apart of the business and that’s why they are one of the greatest.

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Alice, Rawsthorn Nov 5, 1996
Copyright F.T. Business Enterprises Limited (FTBE)
Source: 03071766
Pro Quest document Id: 10371276
Publication title: F.T. London (UK): Nov 5, 1996. Pg. 21
FTC press release May 10, 2000
File No. 971-0079
Copyright 2000 Washington Regulatory Reporting Association
Music CD Industry (internet website)
Smith, Ethan March 21, 2007
Wall Street Journal
Wikipedia (internet website)