EMI Reports Huge Loss for Previous Financial Year

Music record company EMI who have deals with the likes of Robbie Williams and Coldplay have announced that they made an enormous pre-tax loss of £1.75bn over their previous financial year ending 31 March 2009 with illegal downloading the main blame.  They have also said that the company basically needs more money to stay afloat.

The results include over £1bn in write offs alone and the firm are also apparently struggling due to the change from traditional album sales to the more popular single digital tracks. Further woe for EMI also comes from them being at the centre of a large scale legal dispute concerning the purchase of the company in 2007.

Terra Firma, the private equity group who purchased them in 2007 are locked in a battle with US bank Citigroup over billions of pounds in damages concerning the £4bn it cost Terra Firma to buy the company.

They are accusing the bank of inflating the price following the withdrawal of the only other bidder, Cerberus Capital Management.  The bank failed to reveal that Cerberus had indeed withdrawn. However Citigroup have vowed to ‘vigorously’ defend their role in the proceedings.

Falling Behind

Of the 4 major record labels, EMI is now the smallest and is planning to launch a new ‘turn-around plan’ in order to get them back on track and help them begin to compete once again with the likes of Universal and Warner.  The plan is centred around the company trying to cut costs and increase internet sales. EMI have also cut 2000 jobs and lost a few major acts such as Radiohead.  

A quote from the BBC business editor has said that the results have shown “one of the biggest ever losses on a private equity investment.”

Clearly, unless the turn-around plan can show a rapid improvement in the company’s fortunes, the future doesn’t look to healthy for EMI.

Posted at 09:00AM Feb 07, 2010 by Kris Wigfield in Insolvency  |  Comments[0]