Chrysalis predicts drop in publishing revenue

Music group expects loss of $1.7 mil for third quarter

Independent music group Chrysalis Plc. said the economic downturn will affect its publishing revenue, as declining physical sales reduce mechanical revenue and a slowing advertising market affects synch income.

The London-based group, whose publishing roster under Chrysalis Music includes Estelle, Portishead, David Bowie, Gnarls Barkley and the Raconteurs, has announced an interim management statement for the third quarter. It is anticipating a loss of about 1.2 million pounds ($1.7 million) for the year, compared to an operating loss of 3.1 million pounds ($4.5 million) in 2007.

Chrysalis said the start of the second half of the financial year -- April 1-June 30 -- saw chart successes result in a 12.8% increase in its Net Publishing Share revenue compared to third-quarter 2007. But for the 10-month period, the revenue figure is 2.9% down on the previous year, due to uncertainty caused by the failed offer process. The company turned down a 104 million pounds ($152 million) offer from EMI in April.

"Portishead and Pendulum did pretty well for us," group finance director Andy Mollett tells "But Gnarls Barkley was a bit of a disappointment - having had such a huge first album ("St Elsewhere"), the second one ("The Odd Couple") was going to be a bit tricky."

He adds, "There was nothing spectacular, we have not had a huge single or sustainable No. 1 album."

Chrysalis said it expects its publishing revenue to be down on last year's 11.9 million pounds for the 13-month period to Sept. 30, blaming a quiet period for new releases in the final quarter and the economic downturn impacting on physical sales and synchs. The interim statement did not disclose value figures for publishing revenue, but Mollett said he expects a 7%-9% decline, adding that the failed offer process was "very difficult" for the company.

Chrysalis has also decided to restructure its Echo label as an "exploitation company" similar to the Chrysalis Copyrights business, focusing on masters and catalog. The label's incubator model failed to 'upstream' any artists to major labels this year in line with the previous success of Bat For Lashes and Ray LaMontagne.

The restructuring follows a review of the non-publishing business after the company's failed offer process, and the company said Echo has performed below expectations, resulting in higher write-offs for new unproven artists. Between three and four members of staff positions have gone due to the Echo restructuring, Mollett said.

Chrysalis has previously announced it is pursuing a 10% reduction in staff across its publishing operation worldwide. However, Chrysalis Music has recently signed White Lies and Laura Marling and the company said it believes new artists and its catalog will return to NPS growth in the medium term.

Wholesale arm Lasgo Chrysalis remains on track to exceed the company's expectations for the year.
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