Home > BCS, business model, Music > EMI vs. HMV: two sides to the same coin?

EMI vs. HMV: two sides to the same coin?

Given the recent announcement of impending job cuts by EMI, as well HMV’s record Christmas sales, one wonders if such seemingly opposite outcomes give a true reflection of the ailing music industry. Are these two companies still in the same boat?

Yes and no. This is because although the fortunes of both organisations are firmly based on music sales, the differences between them are much more revealing. For one thing EMI, as one of the “big four” global record companies, has operations that cover the whole music lifecycle (from creation to publishing, marketing and distribution), based on its catalogue of recorded music and a host of record labels and artistes. HMV, on the other hand, is mainly a retailer dedicated to shifting music products from all big four record companies, as well as an impressive stock of other entertainment products like DVDs, games and accessories (it also owns other brands like Waterstones the book sellers).

Therefore the strategies adopted by both companies to deal with disastrous climate change are by necessity different. For example, the purchase of EMI by a private equity firm last year set the focus on cost and profitability measures; in step with the realities of a changing sector business model (i.e. moving from CD sales focused business to a holistic revenue model that will cater for other income streams).

This announcement is no great surprise. However the reaction by some of label artistes is interesting if only because it echoes the issues raised in an excellent article by Paul Byrne which identified six models that defined the changing artiste – industry relationship as follows:

  • Equity Deal – The label or equity partner owns everything for a price (including the artiste and their outputs e.g. EMI / Robbie Williams)
  • Standard Deal – The traditional arrangement where the label picks up the bill for the album (including production & distribution etc) and owns the copyright to the work, but pays a percentage royalty to the artiste
  • Licensing Deal – The artiste retains copyright but grants exploitation rights to the label for a period
  • Profit-sharing Deal – The artiste gets limited advance producing the work, but gets to share profits with the label which does the promotion and distribution etc.
  • Manufacturing and Distribution Deal – the artiste relies on the label for manufacturing and distribution only. She does the rest herself.
  • DIY method – The artiste owns and does everything, but gets to keep all the profit (many new, independent music acts go this route when starting out)

Record companies are having to go very lean in order to survive. HMV’s record results may be attributed to the traditional Christmas bonanza for retailers, (I for one am guilty of adding to their fortunes in my own small way), but to be fair they had undertaken to reposition themselves as a retailer of choice, both on the high street and online, and this appears to have paid off. So no great surprises overall, the music industry is still in turmoil albeit showing signs of bottoming out and heading for modest recovery in the near future circa 2010.

The best approach to this Promised Land however may be to harness both physical and digital products and channels to market in a way that makes the best use of their particular strengths. Of course this is easier said than done, but I’d be very interested to hear your suggestions, if you had the opportunity to lead one of these organisations?

Categories: BCS, business model, Music
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