Word: record
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...major record companies have the most to sort out. The problems at EMI, the smallest of the Big Four record companies, have been getting more ink lately than its artists, which include the likes of Lily Allen and Coldplay. With EMI's slice of the world market under pressure - its share fell to 12.8% in 2006 from 13.6% the previous year - U.K. private-equity company Terra Firma acquired the firm for $6.5 billion last August. The new owner has been quick to make its mark: earlier this year EMI announced it was axing as many as 2,000 jobs...
While EMI has had an especially tough time, it is also something of a barometer for the biggest players in the business. Universal Music, the world's largest record company, saw its revenues dip slightly last year. Low margins at Sony BMG, the industry's No. 2, have left its own music business ripe for a private-equity buyout this year, says Gerd Leonhard, a music-industry consultant in Switzerland. And shares at No. 3 Warner Music have been in freefall for months; a $16 million first-quarter loss was announced in February...
...weren't worrying enough that their revenues are sliding, the major record labels are also having more trouble than ever controlling their artists. Prince cut out Sony BMG last July to give away his latest CD through a U.K. newspaper, cannily betting that he'd make up for this lost income by boosting sales of highly lucrative concert tickets. And in October Madonna abandoned Warner Music to throw in her lot with Live Nation, a California-based concert promoter. "The record-label system is built on 100% control," says Leonhard, and major labels "have lost that...
...majors turning into minors? Despite the bad news, that fate remains some way off. Big record companies still excel at winning their bands airtime or prime space on stores' shelves. And for every rebuff from a Madonna, there's an award for a Winehouse, thanks to support from tuned-in record execs. "It's all very well to say bands can do it all themselves; some don't want to," says Max Hole, executive vice president of Universal Music Group International, which oversees Winehouse's label. Many now acting alone admit they got a leg up from a record company...
Still, high-profile departures like theirs could lead fresh talent to think twice about signing to one of the majors. And persuading established artists to stick around is especially tricky when labels are asking for a bigger slice of the revenue pie. Traditionally, when record companies signed an artist, they bought into the promise of an album; an act's other sources of cash - its concerts, say, or merchandise sales - weren't any of the label's business. But now, with album sales plummeting, music companies are chasing juicier income from touring and branded goods. Part of that revenue stream...