Following EMI's positive financials for the year up to 31 Mar 2006, there has been considerable commentary in the music business and financial press as to whether the major's results are a sign that the wider recording industry is now in a period of recovery and growth. Of particular note is that EMI, like its rivals, reported a considerable growth in digital music revenues which are essential to compensate for the inevitable (and in most territories real) decline in CD sales.
US industry website HitsDailyDouble cite two analysts who have different opinions on the future of download sales, and whether the record industry can rely on them to replace lost CD sales. Larry Haverty of Gabelli Asset Management is quoted as saying: "Downloads have higher margins than physical CDs, they're easier to sell and distribute-the industry is going to become more and more profitable". But Richard Greenfield of Pali Capital says: "Sales of iPods and MP3 players are growing, but downloads are slowing. It's proof there's going to be a lot of volatility getting to a point where 100% of sales are downloads".
Within the music industry, Universal Music Group chief Doug Morris said that improving financials from all the major record companies were a good sign. He told the LA Times: "In the long term, this is going to be a very strong industry. The short term will have mixed results, and there have been some tough years, but as long as there are hits, people will want to buy music." SonyBMG Chairman Andy Lack was more cautious, telling reporters: "We won't know if we've turned a corner until this year's fourth quarter. That's when the bulk of sales occur. This is a pivotal year in determining if downloads will offset physical declines".
Talking of Andy Lack and SonyBMG, EMI boss Eric Nicoli, who's been talking quite a bit since his upbeat financials were released, has ruled out a SonyBMG style 'merger' with Warner Music. The Sony and BMG merger led to the combined company being 50/50 owned by the two parent companies, of course, an arrangement leading to some high profile problems in the board room where former Sony and BMG execs clashed, mainly over then CEO Andy Lack's leadership. Talking about his continued interest in acquiring Warner Music, Nicoli is quoted by the Financial Times as saying: "I don't think you'll find many people who believe that a merger of equals is a good way to proceed. I think clear management control is important in executing a combination of this scale."