When EMI Music in September 1999 made David Bowies "Hours" the worlds first album available for digital download, it was the first of many digital milestones for the recorded-music-industry giant.
Yet, despite being a recognized pacesetter in the music industry since the companys inception in 1931, London-based EMI Music knew that the digital revolution was hitting the industry more forcefully than any previous technology evolution ever had—whether vinyl, cassette or CD. In fact, EMI Music understood that, in order to seize new business opportunities, it faced one of its most critical challenges to date: reinvent itself or be outpaced by the digital era.
Thats when company executives decided to go back to the future.
"We chose to step back, look at the scale of change and the network of how consumers enjoy, discover and buy music. Then we looked at what we needed to do and how we were going to get there," said EMI Music Executive Vice President James Anderson, who is responsible for looking at technology and applications worldwide. EMI Music is one of two divisions of EMI Group, the worlds largest independent music company. EMI Groups other division is EMI Music Publishing.
The journey back to the roots of its business made EMI Musics road map to the future clear: transform itself from a manufacturer to a software company.
EMI Music employs approximately 6,000 people worldwide and represents more than 1,000 international recording artists. Revenue for 2005 was about $3 billion, according to the company. EMI Music has more than a dozen record labels, including Angel, Blue Note, EMI and Virgin, to name a few.
EMI Music must now become a company that distributes bits over a network. More important, the music businesss digital age means distributing more information-rich products and more new releases and having the ability to move things quickly, according to Anderson.
"The heart of our business, which is discovering, nurturing and building creative talent—locally, regionally and globally—doesnt change," he said. "However, the digital age demands that we reinvent forms of distribution to increase choice, convenience and accessibility for the consumer."
During the past several years, the number of EMI Musics key digital partners has exploded, growing from zero to dozens, and today includes telephone companies, mobile phone companies, digital distribution companies and online stores. In continental Europe, new partners are springing up daily, according to Anderson.
The popularity of digital formats also varies worldwide. In Asia, for example, digital downloads on mobile phones is a huge market, accounting for a 724 percent increase in revenue last year. In North America, digital downloads on mobile phones is a growing market, accounting for a 165 percent increase in revenue in 2005, according to EMI Music.
The bottom line: The digital revolution in the recorded-music industry demands innovative IT and business processes.
Given the depth and breadth of EMI Musics IT objectives, the company worked with a number of technology partners: Accenture; Avanade, a Microsoft technology integrator; Microsofts Technology Strategy Services, or MTSS; and IBM, among others.
While it appears that the digital revolution is taking the music business by storm, the fact is that EMI Musics revenue from digital products today represents only 5 percent, or $67.6 million, of total revenue. Within five years, the company expects that number to jump to 25 percent of total revenue.
When EMI Music executives looked to the future, Anderson said they saw a number of challenges.
Returning to the companys creative core was first on the list.
"Distribution, manufacturing and warehousing are necessary distractions compared to the companys need to refocus and re-energize on true creative talent," said Anderson.
The second challenge was to reinvent how EMI Music markets and develops an artist brand, moving from dependence on more traditional methods of advertising, such as television and posters, to more modern media, such as mobile phones and the Internet. The bottom line was: How would EMI Music market its products to get consumers to focus on its music.
The third challenge for EMI Music involved assembling and managing its assets—for example, audio files, video biographies and photos—and then selling or distributing the product and collecting revenues. In the digital age, this one-to-many distribution challenge creates a distinct level of complexity compared with physical media such as vinyl, cassettes or CDs, said Anderson.