EMI tunes up digital strategy

EMI tunes up digital strategy

Recording label seeks advice on the changing online model

Global recording company EMI is talking to financial services’ IT departments about how to deal with a tenfold increase in online transactions.

The internet has revolutionised the music industry. CD sales have been dropping steadily for a decade, and digital downloads have shot up by 71 per cent this year alone and are expected to account for more than a third of all European music sales by 2011.

In response, record companies need to move away from the traditional supply chain to a download-based transactional model, according to EMI chief information officer James Anderson.

“Digitisation has exploded choice, and the players are no longer in control of distribution,” said Anderson.

“We must adapt rapidly to changing demand models and we have had to recruit skills from industries such as financial services to do that,” he said.

EMI has already made significant changes to its business.

Last year it completed a major project to digitise operations and make more content available online. And last month the label added a deal with DJdownload.com to existing arrangements with Amazon, iTunes and hundreds of smaller sites.

The changes are bearing fruit. By March this year, EMI Group’s annual digital revenue was up to £164m, almost 10 per cent of the company’s business.

But even the efficient exploitation of the market for digital downloads may not be enough to maintain revenues.

Digital sales have a far lower margin than traditional products such as CDs and records. And despite the rising tide of legitimate downloads, the revenue is nowhere near proportionate to the amount of content being distributed over the internet.

The industry is no longer controlled by record companies, said Anderson. “The consumer is in control in terms of how they want service, business models are changing on a monthly basis and we have to be ready to adapt quickly,” he said.

One answer may be to find alternatives to straight product sales.

Last month, EMI signed a deal with social networking site Imeem, under which users can download EMI content for free, but the label takes a slice of the site’s advertising revenues.