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EMI Corporate Finance

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EMI Corporate Finance
For the exclusive use of C. Portillo Cardenas, 2015

UV1201
Rev. Feb. 13, 2009

EMI GROUP PLC

In this Internet age, the consumer is using music content more than ever before— whether that’s playlisting, podcasting, personalizing, sharing, downloading or just simply enjoying it. The digital revolution has caused a complete change to the culture, operations, and attitude of music companies everywhere. It hasn’t been easy, and we must certainly continue to fight piracy in all its forms. But there can be no doubt that with even greater commitment to innovation and a true focus on the consumer, digital distribution is becoming the best thing that ever happened to the music business and the music fan.
—Eric Nicoli, CEO, EMI Group1
In early spring of 2007, Martin Stewart drove through the darkened streets of Kensington in West London. As chief financial officer (CFO) for global music giant EMI, Stewart already knew most of the news that would break at the company’s April 18 earnings announcement.
Annual underlying revenue for the company was down 16% to GBP 1.8 billion (British pounds).
Earnings per share (EPS) had also dropped from 10.9 pence (p) in 2006 to −36.3p in FY2007
(fiscal year). Those disappointing numbers were roughly in line with the guidance Stewart had given investors in February. The performance reflected the global decline in music industry revenues, as well as the extraordinary cost of the restructuring program EMI was pursuing to realign its investment priorities and focus its resources to achieve the best returns in the future.
The earnings announcement would include an announcement of the dividend amount, which had not yet been determined. The board would meet soon to review EMI’s annual results,

1

International Federation of Phonographic Industry (IFPI), “IFPI: 07 Digital Music Report,” January 2007.

This case was written by Elizabeth W. Shumadine (MBA ’01), under the supervision of Professor Michael J. Schill, based on public information.

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