EMI aims to reap more income from catalog

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NEW YORK -- Executives at EMI Group Plc, which is being bought by private equity firm Terra Firma, are working on ways to squeeze new revenue from the company's catalog of artists and songs from the Beatles to the Beach Boys.

EMI has formed long-term strategic relationships with advertising agencies such as Saatchi & Saatchi and DDB to find new ways to repackage music and create music-related products around its artists, recordings and songs.

"Our back catalog is so prestigious and so rich in heritage in its impact on pop culture that half our effort is reminding people and recreating awareness of the music's availability, " said Ronn Werre, president of EMI Music Marketing.

Over the next year, Saatchi & Saatchi will help EMI seek new ways for fans to reconnect to music they might hear on a commercial or TV show and ultimately translate that into a transaction, Werre said in an interview.

EMI slipped last year to rank fourth among the world's largest music companies, losing market share due to a weak artist roster. The wider music industry's fortunes also took a worse than expected turn as U.S. CD sales, already on the decline, fell nearly 20% in the first half of the year.

But it wasn't always like this for EMI. The company owns one of the most prized collections of labels and artist recordings in the entertainment business, including Pink Floyd, Frank Sinatra and The Rolling Stones.

Some analysts say the high price of $4.8 billion that Terra Firma is paying for EMI can be justified in part by its strong catalog and the brand names of its artists.

Traditionally, music companies have focused on the "front end" of their business, producing new releases and discovering new artists. Their relationships with marketing agencies are usually on a album-by-album basis. While front-end remains important, the emphasis has clearly shifted.

"In the new world of the music industry, where revenues are declining and margins are tighter, and with a key demographic trend where music buyers are getting older, it means that back catalog gets more important," says Mark Mulligan, an analyst at Jupiter Research.

Indeed EMI executives, like their counterparts at Warner Music Group and market leader Universal Music Group, have acknowledged the need to diversify their businesses as the old model of selling CDs or downloads comes under pressure.

Extracting more revenue out of back catalog makes sense in a market where the future is uncertain, said Mulligan.

"Back catalog is a safe high margin business because you have low fixed costs with no advance fees or studio time payments, and it's lower risk because these artists are known brands," he said.

EMI's new marketing drive is also closely tied to its decision in April to drop copy protection software from music it sells in digital formats.

The company says dropping digital rights management (DRM) will free the music to be marketed and shared in a variety of new products and services still to be announced.

One example is a partnership with Chicago-based digital marketing agency VerveLife last month, which will make EMI's music available on a Burger King-branded mini-Web site.

"Since we went DRM-free, it's very easy for us to get to where the consumer is rather than the consumer to get to where the music is," said Werre.

Saatchi & Saatchi is owned by France's Publicis.

DDB is part of Omnicom Group.




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