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EMI Posts First Increase in Sales in 5 Years Amid Jump Downloads

The company reports 5.8% higher revenue, but profit declines 47% because of one-time accounting changes.

November 17, 2005|Charles Duhigg | Times Staff Writer

Music giant EMI Group reported its first sales jump since 2000 thanks to a big increase in digital downloads and strong album sales by Coldplay and Gorillaz, although profit fell because of one-time accounting changes.

In reporting results for the six months that ended Sept. 30, the London-based company posted a 5.8% increase in revenue from a year earlier to $1.6 billion, with profit falling 47% to $40.95 million. Digital sales in that period soared by 142% to $81 million.

"As more people get portable music players and download prices evolve, digital revenues will continue to grow," said Alain Levy, chairman of EMI's music division.

Coldplay's "X&Y" has sold more than 7.5 million copies, while Gorillaz's "Demon Days" has sold more than 3 million. Another big EMI seller is Robbie Williams' "Intensive Care," which has sold 3.5 million copies since its release last month.

As digital music downloads soar, EMI, along with the other major music companies, has pushed Apple Computer Inc. to raise prices from 99 cents on some songs sold at the company's iTunes Music Store.

Apple Chief Executive Steve Jobs in September called music companies "greedy" for seeking to raise prices. But David Munns, chief of EMI Recorded Music North America, said he expected to reach a compromise with Jobs by next summer.

Despite increases in digital downloads, analyst Richard Greenfield of Fulcrum Global Partners warned that the industrywide growth rate was slowing.

"Digital sales have grown dramatically year-over-year in 2005," Greenfield wrote in a report. But "it appears increasingly hard to believe that digital will grow fast enough in 2006 to offset mid-to-high single-digit declines in physical music sales."

EMI executives counter that the digital market will further expand as broadband services proliferate. The company also said it was prevailing in the fight against piracy, pointing to a recent lawsuit against Chinese search engine for allowing free downloads.

Digital music is "moving from something that harms our industry through illegal use to something that's now driving it," EMI Chairman Eric Nicoli said in a conference call.

Nicoli forecast that digital revenue will account for 25% of the global music market by 2010.

EMI also may benefit from an expected resolution of another squabble with Apple, over EMI's copy protection technology.

Currently, some EMI compact discs cannot be downloaded into the iTunes player. Munns said he expected the problem to be resolved by early next year.

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