EMI, a member of the recorded music industry association IFPI which pursues file-sharers, is in financial trouble. But these particular  woes were not caused by file-sharers - instead,  it was the bankers which have the brought the company near to financial collapse. So how should policy-makers view the music industry?

 

 One of the big four music labels, EMI, is set for a major financial battle in the US courts this week.

The financial media are very excited, and positively foaming at the mouth,  at the prospect of the case. It is  is expected to turn into  high drama as the events unfold. EMI's  owner, Guy Hands, is suing Citigroup  over advice given by one of Citigroup's  investment bankers - advice which influenced Mr Hands decision to increase his purchase offer for EMI to £4.2 billion - a lot more than it was worth.

The court case illustrates that the underlying financial problems of the music industry may be quite different from what they like to say to policy-makers.  The purchase of EMI was

completed in 2007, just before the credit crunch when all corporate valuations slumped and Mr Hands  found himself carrying a massive debt which was not reflected in the corporate assets . His lawyers today accused Citigroup of ‘tricking'  him into the purchase.

 

 It is reported that EMI has had further finanicial woes with its pension scheme, which it has recently had to address - along with many other UK companies.

 

However, it is also reported that EMI has reduced its losses from £1.5bn to £0.5 bn , and that it has enjoyed a number of financial successes in the past year, including a re-release of a Beatles album.

 

It's interesting to consider the EMI story in light of some new analysis reported by The Economist , which suggests the music industry is in quite good shape, actually.

 

The Economist article suggests that whilst sales of physical CDs are indeed dropping, sales of digital music are increasing, as are the prices of concert tickets: the music business is not dying, but it is changing profoundly.

 

Perhaps we should take more time to address those profound changes, and stop trying to push through  unworkable 3-strikes measures.

 

And policy-makers could begin with the provocative thought that EMI's woes can be laid fairly and squarely at the door of the bankers,  and not file-sharers.

 

 This article is licensed under a Creative Commons Attribution Non-commercial-Share Alike 2.5 UK:England and Wales License. http://creativecommons.org/licenses/by-nc-sa/2.0/uk/ It may be used for non-commercial purposes only, and the author's name should be attributed. The correct attribution for this article is: Monica Horten (2010) Music company EMI set for court showdown in US http://www.iptegrity.com 18 October   2010

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