Wednesday, January 09, 2008

Under starters' orders ....

EMI is a company which has seen some serious changes in its principal industry - music production, distribution, promotion and marketing.

Let's examine some of these.

Changes in Production and Distribution: As a record producer, EMI once owned large LP manufacturing facilities in Hayes which were superseded by CD manufacturing facilities in Swindon which were then finally closed and off-shored to the Netherlands and then finally outsourced.

EMI no longer owns the means to manufacture "traditional" music media and this makes perfect sense in a world where digital music can be simply copied and distributed over the internet.

The internet itself is another massive change, becoming a major sales channel for the music industry and accounting for almost 10% of EMI's revenues. Obviously, this new industry is something that EMI is pursuing.

Apart from the usual cited issues of piracy and new internet business models, these changes in production and distribution create a number of other more serious problems for EMI. These include:-

  • EMI used to be among an elite band who had access to the means for music publishing. There existed a high cost barrier to publishing a record, broadcasting TV and print publishing as these all required access to high cost physical assets. Controlling the access to such assets was a powerful mechanism for controlling artists as they had few alternative routes. If you wanted to produce a record then you generally needed to have a deal with a record company. Unfortunately for EMI this is no longer true as artists can now publish their work direct to the internet.
  • As the barriers to competing in the music industry have reduced, this has allowed for more competitors.
  • Artists themselves are realising that alternative models for business exist. For example giving away content (in this case music) whilst selling services and other physical products related to that digital content (such as performances and merchandising)

So what is EMI's role in this new world? Whilst the elitist world of music production and distribution maybe crumbling, there still remains clear roles for talent scouting, nurturing and promotion from the cacophony of wannabe musicians.

As this world rapidly heads to an environment where content is free and revenue is made from related activities, then those companies supporting such activities will become the backbone of tomorrow's media industries.

So for a company like EMI signing up a growing stable of talent and focusing on promotion and marketing would seem to be the way forward. This brings me neatly onto ....

Changes in Promotion and Marketing: I was amazed to read in the Guardian that EMI's boss Guy Hands (EMI was recently bought by Terra Firma for some £2.4bn) is clamping down on costs by limiting new signings and spending on promotion and marketing.

Now I'm assuming that Guy Hands is some sort of super smart cookie and not hell bent on corporate suicide, but I can't help wondering what the dickens is this fellow doing?

Any answers would be appreciated, as in my opinion this is the future equivalent of committing seppuku before the race for this brave new world has really got started.

A sort of ready, steady ..... arghhhhhh.

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