Rivals fear spread of piracy after EMI

music-video deal with Apple

By Stephen Foley in New York

Sunday, 8 April 2007

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Media industry executives and analysts have expressed surprise and

alarm at last week's decision by EMI, the record label, to start selling music videos
without the protection of anti-piracy software.

The decision was a little-noticed part of the company's ground-breaking deal with
Apple that made all of EMI's catalogue available on iTunes in a format that can be
copied and played on any digital device without restriction. That deal, announced with
fanfare by EMI chief executive Eric Nicoli and Apple founder Steve Jobs, was hailed
as ushering in a new digital music era.

EMI is expected to begin announcing deals with other online retailers within the next
few weeks, and Apple is planning to give the record label's music a big promotional
push when it starts selling the premium-priced restriction-free versions next month.
Rival record companies are beginning behind-the-scenes preparations to follow suit,
should EMI's experiment prove successful in boosting digital music sales.
Songs from EMI artists - from Lily Allen to Tina Turner, Coldplay to Queen - will all
be made available in a higher-quality format free of so-called "digital rights
management" (DRM) software, which allows the retailer to control how many devices
the song can be played on. While labels have previously insisted on DRM to prevent
illegal copying, many in the industry have come to believe that the restrictions are
deterring people from buying songs and may be driving them on to peer-to-peer file-
sharing networks such as LimeWire - where pirated music, free of constraints, can be
downloaded without paying.

EMI said it would also strip all its music videos of DRM and is not raising the price
of a download, which is $1.99 in the US and £1.89 in the UK.

David Pakman, chief executive of eMusic, the next most popular online music service
after iTunes, said the decision to abolish DRM on music videos came as a surprise.
"The reason DRM is not working in music is because it has never been present in
music. CDs are not copy-protected so copy-protected digital music defeats consumers'
expectations. But every DVD you have ever bought, you have been unable to copy."

Mr Jobs, who had a second career running Pixar film studios and now sits on the
board of Disney, which acquired it, insisted last week that video content such as
television programmes and films would remain DRM-protected. Hollywood is
certainly insisting that it do so.

With more video available through iTunes and other online stores, film and TV
producers are determined to prevent the rampant piracy that afflicted the music
industry, but most content is already available on file-sharing networks. The risk is
that internet users will get into the habit of downloading video for free before the
industry can get them into the habit of buying DRM-protected content.

One media industry executive said that EMI's restriction-free video on the iTunes site
was setting an unwelcome precedent. "We are perplexed as to why EMI has done this
and surprised at their thoughtlessness," he said.

Supporters of EMI's decision say that music videos are different to other types of
video content since they have traditionally acted as promotional tools for music sales
rather than sources of revenue from consumers in their own right. In fact, selling
standalone music videos at all represents a useful new revenue stream, they claim.

Apple is believed to be making a slightly higher profit on EMI's DRM-free songs (39
cents, compared to 29 cents on copy-protected songs, according to industry rumours)
and has promised to give a major push to EMI songs when it starts selling the new
format next month. Since iTunes accounts for more than 80 per cent of paid-for
digital downloads, that alone could alarm EMI's rivals, SonyBMG, Universal and
Warner Music.

These companies are all watching EMI's experiment closely. Most industry observers
believe they will follow suit.

The argument for not doing so is that unprotected songs will quickly find their way on
to file-sharing networks where they can be freely downloaded, meaning that fewer
people will actually buy them. Ultimately, it will come down to the numbers - and
probably quite quickly.

Mr Pakman said EMI will find its move is not contributing significantly to piracy, but
that it does contribute usefully to its bottom line. "This is the beginning of the end of
DRM in music. Paid-for downloads are dwarfed in number by the billions of songs on
peer-to-peer networks, so that differential can't get much worse."

EMI expressed confidence in its decision, saying it came after a string of experiments
with DRM-free music, including on some Norah Jones songs last year.

EMI still pursuing Warner in face of

rival
By Stephen Foley

Monday, 24 November 2003

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EMI, the music group that is home to Kylie Minogue, Robbie

Williams and Tina Turner, is set to continue its efforts to pursue a merger with
Warner Music, even if Time Warner sells its music interests to a consortium headed
by the media moguls Edgar Bronfman and Haim Saban.
EMI, the music group that is home to Kylie Minogue, Robbie Williams and Tina
Turner, is set to continue its efforts to pursue a merger with Warner Music, even if
Time Warner sells its music interests to a consortium headed by the media moguls
Edgar Bronfman and Haim Saban.

Mr Bronfman was last night up against a deadline to show Time Warner that he had
financial backing for a bid estimated at $2.55bn (£1.5bn), but he remained the
favourite after EMI's offer of $1bn for a controlling stake was sidelined last week.
EMI's chairman, Eric Nicoli, was yesterday canvassing the views of his board on the
music group's next move. The company's shares have been under pressure on fears a
transforming merger is once again slipping from its grasp. EMI already has suffered
two failed mergers under Mr Nicoli, regulators blocking a combination with BMG
and an earlier deal with Warner Music.

The company believes Mr Bronfman may agree to sell the recorded music arm of his
purchase on to EMI, or accept some other form of combination. EMI has a higher
calculation of the record labels' worth than Mr Bronfman because it would be able to
extract cost savings estimated at £200m from a combination.

"There is a theoretical arbitrage value here, in that EMI is offering a higher value for
that business," one City source said.

Mr Bronfman and his private equity backers would be left with the Warner Chappell
music publishing division, which manages artists' back catalogues and, therefore, has
a predictable inflow of royalties. Any deal would be fraught with regulatory
uncertainty, however, and there is also personal animosity between Mr Bronfman and
Alain Levy, EMI's head of recorded music. Formerly president of Polygram, Mr Levy
was forced out after its acquisition by Mr Bronfman's Seagram in 1998.

It seemed unlikely yesterday that Mr Nicoli would sweeten his offer for Time
Warner's business, having described it last week as "full and fair". EMI appears to be
pinning its hopes on Mr Bronfman being unable to tie up the necessary financing,
leaving the UK group with the only deal on the table.

Investors are worried that it will be left on the sidelines in an industry that is
consolidating in order to shore up profitability. However, it may be tempted to wait,
arguing that the competitive landscape has eased with Warner Music under Mr
Bronfman's control rather than Time Warner's.

Bbc report

A decision by EMI to release more than 140,000 songs for download over
the internet has been welcomed by net music firms.

Music fans will be able to download tracks from more than 3,000 EMI artists
including Coldplay, Kylie Minogue and Robbie Williams through about 20 online
retailers across Europe.
The battle between legitimate downloads and the music pirates has been a long
and bitter one and the major record labels have been accused of doing little to
help the situation.

Faced with sliding music sales, EMI has ditched efforts to stamp out online
distribution altogether in favour of more liberal licencing arrangements.

RIP retail?

Some of the tracks could be available on the

internet up to two weeks' ahead of the CDs hitting As sure as eggs is eggs,
the shops. similar announcements will be
just around the corner for the
others
This timing is significant, said Paul Myers, head of
net music firm Wippit. Paul Myers, Wippit

"Having it two weeks' ahead of the shops means they will be beating the pirates
to it," he told BBC News Online.

"The question is does this mean that EMI now regard the internet as the most
important channel to customers?" he asks.

It may not be greeted as such good news by the retailers though.

"This could have a negative impact on traditional retailers too of course who are
being beaten to the punch," said Mr Myers.

Wippit is one of the online music distributors that will make the EMI trackers
available on the internet.

It has been in talks with record labels about making more of their catalogue
available for sale on the internet for over two years.

Mr Myers believes other big players such as Universal and BMG will follow suit.

"As sure as eggs is eggs, similar announcements will be just around the corner
for the others," he said.

EMI acknowledges that its decision is a significant move towards digital music.

"EMI is now providing consumers with the music they want in a way that is faster,
safer and more adaptable than is currently available on any of the current
services and it's legal," said Tony Wadsworth, Chairman of EMI Recorded Music
UK & Ireland.

Do

cument Download Request

1/1
 EMI Music is one of the top global recorded music companies and
represents artists spanning all musical tastes and genres including Lily
Allen, Coldplay, and Pink Floyd.
No longer able to rely on mass marketing to drive in-store sales, EMI Music had to figure out
who, exactly, was downloading its artists' music, and how to maximize communications with
those consumers to strengthen relationships and drive more revenue.
EMI Music opted for enterprise marketing software from Neolane that would help the
company better capture consumer information from multiple sources and integrate its
disparate CRM and customer analytics applications. This intelligent marketing solution
allows EMI Music to get to know its customers on a granular level, and communicate in a
more personalized manner

1. Background

The arrival of the millennium saw the Internet expand in its application as a low cost channel to
market. Consumers were rapidly embracing the convenience and flexibility of music downloads,
which circumvented the long established distribution channels that were the traditional profit base
of the industry.

EMI’s response was a global technology transformation called Digitising EMI Music. Fundamental
to this strategy was its Global Repertoire Programme (GR), an initiative to facilitate unfettered
corporate access to its catalogues worldwide.

2. Challenge

2. Challenge

GR’s intended function was to enable EMI to maximise worldwide sales across all available
channels – physical and digital – by having a single, globally accessible, online database listing all
music assets along with the associated and extremely complex rights information.

EMI now faced the significant challenge of how to engage 65,000 staff in more than 50 countries
with this radical new way of working.

3. Solution

3. Solution

V-On conducted an extensive global research project to understand how EMI’s employees would
react to GR. Based on this, V-On created a dedicated brand identity and launched a
communications programme to champion GR internally. Integral to this was merging the detailed
branding guidelines of a global recording corporation with the straightforward language and tools
necessary for GR to be used by people in multiple cultural and language markets.
V-On then developed a distinctive and engaging web-based portal that offered streamlined access
to EMI’s music assets, and introduced interrogation, research and educational capabilities for
users. New functionality maximised the benefits of having music data held within a centralised,
consistently indexed source.

4. Result

4. Result

V-On’s online portal significantly cut the financial costs of EMI’s new business and technology
strategy. The centralisation of the portal eliminated regional reproduction of data, reduced
extensive international travel by EMI executives, and ensured lasting savings on professional fees.

Integrated adaptability to different languages and the conditions of local markets demonstrated
EMI’s consideration for the cultures of its worldwide operations. However it simultaneously
addressed the need for greater consistency and accuracy in data records.

5. Perspectives

5. Perspectives

The Human Resources Perspective

Change affecting thousands of people is the ultimate management challenge. By putting staff
engagement at the centre of its solution for EMI, V-On guaranteed the smooth implementation of a
major technology change across multiple language markets.

The Marketing Perspective

V-On created an internal brand that brought gravitas to the launch of EMI’s Global Repertoire
Programme. A distinctive identity for the transition engaged employee audiences, while an
automated presentation used high production values to deliver key messages.

The Finance Perspective

V-On’s understanding of the variety of cultures and languages in international business, and its
ability to build appropriate online solutions, meant that EMI was able to cut the global rollout costs
of a major new business and technology strategy.

“We knew we had adapted our music assets ready for the digital world, but the
challenge was getting so many people going with the technology in such a short
space of time. V-On’s solution was as elegant as it was successful. I can’t think of
a global technology rollout at this scale that has gone so smoothly.”

Alex Di Martino - EMI GLOBAL REPERTOIRE

EMI Music Publishing
International company | the world’s leading music publisher
EMI is the world’s leading independent music
company. It operates directly in 50 countries,
with licensees in a further 20 and employs
around 5,500 people. For the year ended 31
March 2007, EMI Group reported revenue of
£1,751.5 million and £62.7
million in underlying profit before tax. The
company comprises two divisions EMI Music,
one of the top global recorded music
companies, and EMI Music Publishing, one of
the world’s leading music publishers.

EMI Music Publishing owns one of the largest catalogues of songs in the world,
containing more than a million contemporary and classic titles. Its roster of
songwriters is unparalleled and the company has won and continues to win more
industry accolades and publisher of the year awards than any other music publisher.
Its catalogue of best-selling songs includes Bohemian Rhapsody, I Heard It Through
The Grapevine, New York, New York, Over the Rainbow, the James Bond theme,
Singin’ In The Rain, Santa Claus is Comin’ to Town, Wild Thing, We Will Rock
You, Angels, Baby Love, Crazy in Love and Daydream Believer and is home to many
of the world's best songwriters including Arctic Monkeys, James Blunt, Cathy
Dennis, Jay-Z, Alicia Keys, Pink, Usher, Kanye West and Amy Winehouse. With
offices all around the world, EMI Music Publishing has about 640 staff and in the
year ended 31 March 2007 generated £401.3 million in revenue.

EMI Music is evolving its business to capitalise on the growth opportunities created
by the digital revolution. In an effort to respond more quickly to demands for new
music products and services, EMI has partnered with Microsoft and identified a
series of core projects that will help the company achieve those goals. These
projects are being realised using Microsoft® technology and range from providing
real-time management information to the standardisation of financial and sales
systems. To ensure best practices and best use of technology and resources across
all projects, EMI Music has engaged Microsoft® Technology Strategy Services
(MTSS), an offering from Microsoft Services. EMI benefits from a
dedicated Architecture and Planning Advisor who has deep knowledge of both
Microsoft technology and the music industry, and who uses this expertise to help
future-proof EMI Music’s technology infrastructure.

Situation

EMI, the world’s largest independent music company, has embraced the digital
revolution currently taking place in the music industry and is re-tooling its technology
infrastructure to meet the needs of a more dynamic market. EMI Music, its recorded
music division, operates directly in 50 countries and licenses its music to another 20
countries around the world. The company represents more than 1,000 artists across all
genres, and is committed to using technology to its advantage to demonstrate
innovation and market leadership.

As fans seek new ways in which to obtain and listen to music, EMI Music must
evolve its technology strategy to ensure it is able to deal with changing consumer
behaviour. After strategically reviewing its global infrastructure, EMI Music decided
to embark on several core change programmes that will better prepare the business for
the digital age. These programmes cover a broad range of infrastructure
modifications, from front-office and marketing applications to standardisation of
global financial and sales systems.

Another core transformation initiative underpins these change programmes: the

creation of a new Global Technology Architecture (GTA). GTA is about both
processes and technology. Each of the new systems implemented as part of the change
process has a requirement to deliver information, either to other systems or end users.
In each case, EMI Music needs to ensure the necessary integration to make this
possible. To facilitate this, the company created an integration competency centre,
which sits in the service delivery group. Microsoft® BizTalk® Server 2004, which is
part of Microsoft Windows Server System™ integrated server software, will underpin
the GTA and the integration of other change programme technologies.

The GTA also defines the context, support processes, and approach to how each
project stream should be carried out. The company has partnered with Microsoft
Certified Partner ThoughtWorks to support GTA integration objectives. As a leading,
global organisation, EMI Music has access to a broad range of skills and expertise
through its in-house IT department. However, given the importance of the change
programmes and GTA, the company decided that it was sensible to engage a third-
party consultant who could help keep the project on track, and provide useful external
perspective.

Michael Austin, Head of Global Technical Architecture, EMI Music, says: “Each of
the change programmes plays a role in ensuring the future success of our business in a
rapidly evolving marketplace. As such, the decisions we make now about
technologies or methodologies need to be right first time. We had already decided to
partner with Microsoft, but needed to make sure that we were using its products and
knowledge in the most effective way possible.”

Solution

By linking with Microsoft Technology Strategy Services (MTSS), a Microsoft

Services offering, EMI Music was able to extract the best possible knowledge of
Microsoft products and technologies and its developmental roadmap.

MTSS offers companies like EMI the option of choosing from a wide portfolio of
high-value, strategic consultation offerings. Enterprise Strategy Consultants (ESCs)
lie at the heart of this programme, and each company that signs an MTSS agreement
benefits from dedicated, onsite consultants who are highly knowledgeable not just
about Microsoft technology, but also about their customer’s industry—in this case,
media. In EMI Music’s case, the signing of an agreement for an ESC in 2003 marked
the beginning of a close working relationship with Microsoft ESC Andy Hill.

Hill says: “It is my job to work closely with EMI to understand what drives its
business and what is holding it back. By closely observing the existing technology,
people, and processes, I’m able to offer my advice to the company as it seeks to move
strategically from where it is to where it wants to be, particularly with regard to
making the appropriate investments in technology and personnel.”

Typically, an MTSS engagement involves various stages of strategic assistance. The

process starts with a Discovery Phase where an ESC works closely with key
stakeholders at all levels of the client organisation to create an IT roadmap, which
then evolves throughout the relationship.

As such, Hill and the Microsoft team began working closely with EMI Music to gain
a broad understanding of its aims and objectives as a company, as well as its specific
intentions for each of the change projects. This allowed the team to recommend the
most appropriate Microsoft solutions—detailing technologies and their perceived
advantages in white papers, and making technical product demonstrations where
appropriate—to help EMI realize its vision. Since Hill is an integral member of the
team, he is also able to provide advanced detail on new and emerging products.

“It became clear very quickly that Andy Hill would bring a lot of value to the ongoing
work we are doing with GTA. We’re using different technologies and roadmaps, each
with their own product silos, and Hill’s input was very valuable as we worked to
connect these systems,” says Austin.

Benefits
Ensuring the Technology Puzzle Fits Together

Each of the change projects, underpinned by the GTA, will provide individual
benefits. But it is the combined benefits that will deliver the greatest advantage to
EMI Music going forward. As a result, EMI chose to pursue these projects in parallel
to speed the time to deployment, but this approach also introduced a greater deal of
change and complexity in a shorter period of time. To simplify this complexity and
provide an independent, universal view of business change, Hill contributed to a
number of technical sub-groups within EMI Music, answered questions, and provided
a direct link to Microsoft.

EMI Music is a global company, and coordinating development and project efforts
around the world is no easy task. Given his ties to Microsoft and his deep knowledge
of EMI Music, Hill helps coordinate account teams around the world to ensure a
consistent and coherent approach—24 hours a day, seven days a week—for each
project.

Austin says: “Working with an Enterprise Strategy Consultant has given us access to
a great deal of information and best practice expertise to confirm that the way EMI is
designing, configuring, and deploying its systems is best in class. It’s an incredible
way for us to tap into the vast knowledge that exists within Microsoft, which
historically was difficult as there are so many different products that overlap. Rather
like the IT Infrastructure Library (ITIL), Microsoft also has its own standards around
how these products should be used, which ensures everything we do follows best
practice.”

Minimising Risk, Maximising Success

Much of the work Hill and his team did in the initial stages of the engagement was
based around partner management. Microsoft has an extensive network of partners,
each providing specialist skills in core technologies with varying levels of
certification.

Austin says: “Andy has helped us a great deal in establishing good relationships with
partners. Whenever I have expressed a need to work with a partner for a specific area,
he helps ensure that they are best suited to the job and the needs of EMI Music.”

Hill says: “EMI Music is placing a great deal of emphasis on Microsoft technology
and using some very new products and technologies, such as the [Microsoft] BizTalk
Adapter for mySAP. Understandably, the company needs the reassurance that comes
with knowing you have someone on the inside working on your behalf.”

A Vision for the Future

“Microsoft is a diverse organisation with product offerings spanning home users and
enterprises, and provides unique technological insight into where we think the
industry is headed. In the case of EMI Music, we have leveraged our technical
expertise to help the company build out its infrastructure to realize its business goals.
Technology is behind the business of the future, and we’re helping EMI Music take
advantage of Microsoft’s knowledge of that future,” Hill says.

Like any organisation with a vision of where it is and where it wants to be as the
industry evolves, security is very important to EMI Music. Given its commitment to
ensuring the highest possible levels of security in its products and working with
security policy groups to safeguard against potential malicious technology threats,
MTSS has played a supporting role as EMI works to build a secure, digital future
 Sophisticated solution | web services for integration with
other systems

Skilled consultants and developers from Essence International ensured consistency of

sophisticated solution. This solution enables all branches using financial, purchase,
sales, analytics, consolidation or report tools due to the legislation in each country. As
part of the implementation, there is an on-line web-services based integration with
other systems used by EMI Music Publishing for royalty calculations.

Future development | ensured thanks to Essence solution

EMI Music Publishing is an example of a modern and dynamic company that makes
use of all market opportunities for its future development. The ability to adapt quickly
and react to eventual changes is a necessity for the system and also for those who
implements the solution.

Cooperation with Essence International | fast recovery of

investment

Chris Rogers, Project Manager at EMI Music Publishing, described the cooperation as
follows: „EMI Music Publishing is implementing MS-Dynamics as an enabler on
many fronts – from the standardisation of Technologies and Accounting processes
across our European operations to providing a unique platform to interact with our
Music Copyright and Royalty management systems. Our well-defined relationship
with Essence and their rapid and efficient turnaround of development requests is
taking us ever closer to our vision of one strategic set of IT platforms serving our
diverse operations in their very different markets. The payback on our investment is
expected to be in terms of tighter controls, increased transparency, standardisation and
improved analytics, all of which are critical in continuing to provide excellent service
to our writers.
OVERVIEW
EMI Music Distribution ( EMD) serves as the customer fulfillment engine for
EMI Music, the third largest record company in the world and home to such
labels as Capitol, Virgin, Priority, Blue Note, and Astralwerks. Headquartered
in Woodland Hills, CA, it encompasses ten regional sales offices, three
distribution centers, and a massive manufacturing plant. EMD actively
markets its stable of artists to music to both offline and online retailers such
as Tower, Musicland and Amazon.com.

BUSINESS CHALLENGE
As the music industry has become increasingly competitive – due to both
more music releases each year and alternative demands for the consumer's
entertainment dollar – EMD sought to use the web to improve trade
communication and the distribution of marketing materials. EMD's expansive
sales organization struggled to provide timely and accurate sales information
for retailers to make informed buying decisions. They were also unable to
distribute digital assets – such as CD cover artwork, and artist and product
information

THE SOLUTION
Vibrant (formerly KORE) helped establish ROI targets and architected a
digital media extranet that would securely link EMD with its outside trade
partners via the Internet. Cross-functional teams working throughout the
entire EMD organization allowed Vibrant to assess how real human beings
and current legacy systems were going to “feed” information to the extranet.

Vibrant developed a robust and scalable platform that houses a wealth of

information and media on EMI's artist and releases. Serving as a massive
repository of EMI music's content and metadata, the extranet is now being
leveraged across all of EMI’s business units and E-Commerce efforts.

Features:
•Highly-secure, password protected site accessible by retail customers,
journalists and internal staff
•Integrated administrative web tools to allow for distributed publishing
throughout EMI
•Allows users to search EMD’s entire back catalog and to review
commercial programs
•Digital assets – artwork, itineraries, audio, photos, bios, etc. – are all
just a click away for qualified users

Benefits:
•Rapid ROI and business efficiencies by eliminating shipping costs and
enhancing trade service
•Central repository for dynamic, secure distribution of all EMI music
trade related digital assets and information
•Open, scalable architecture that allows for easy extension to new E-
Business technology initiatives