HITS Daily Double
"We’re being very realistic and using a healthy dose of common sense in what we’re doing. ... We have a much more lean, working machine."


EMI Worldwide Vice Chairman/EMI Recorded Music N.A. Chairman/CEO Bullish on Prospects for Company, Music Industry
EMI Worldwide Vice Chairman/EMI Recorded Music N.A. Chairman/CEO David Munns started out at EMI in 1972. After rising through various marketing posts, including product manager (one of his projects was Wings’ first album), he was given responsibility for the U.K. marketing of non-U.K. acts such as Dr. Hook, Kraftwerk and Helen Reddy. In 1979, he moved to EMI Canada, where he oversaw all label operations except for A&R.

His relationship with new EMI boss Alain Levy dates back to the pair’s tenure at PolyGram, which Munns joined in 1984 as Managing Director of Polydor U.K., where he tripled the label’s revenue and worked with the Cure, the Bee Gees, Andrew Lloyd Webber and Van Morrison.

In 1991, he was promoted to Sr. VP Pop Marketing. From the time PolyGram went public in 1989 to Levy and Munns’ departures in 1998, the company’s marketshare rose from 12.5% to 17.5%, making it the #1 record company in the world. Its market capitalization grew fourfold during the same period, from $2.5 billion to $10.4 billion. Additionally, the pair grew the music-operating margin from 12% to 15%.

From 1994-99, Munns was a board director for Lloyd Webber’s Really Useful Group, managed Bon Jovi, and in 2000, was named to the board of directors at Peter Gabriel’s OD2. When Levy came to EMI in October 2001, replacing Ken Berry, he named Munns EMI Worldwide Vice Chairman, then, in February 2002, added the title Chairman/CEO of EMI Recorded Music N.A., giving him responsibility for North America.

Since that time, Munns has overseen the resurgence of EMI’s North American territory, which last year was responsible for 40% of the company’s worldwide operating profit, up 27% from 2002. HITS' Roy Trakin translates from the Queen's English into Pidgin Yiddish.

I take it you are pleased with EMI’s financial results.
Absolutely. In America, we’re doing fine. We’re starting to build a really nice roster. We had a number of good, successful records last year. It all bodes very well for us.

So you’re bullish on the record business. Have we finally hit bottom?
I think we’ve hit bottom in the U.S. In other parts of the world, the story varies. U.K. is in good shape. Continental Europe is not in such good shape, though that’s partly a creative issue about the music as well as piracy. I believe the business has bottomed out in Japan, from the signs we’re seeing right now. Latin America and Southeast Asia still have problems with piracy. It’s a mixed bag.

In North America, though, you feel EMI labels are on the right path?
I’m also the Vice Chairman of the World, don’t forget, so I’m still anxious about all those people you refer to as "foreign" in America.

EMI is unique in the fact it is not a U.S.-based company, so you have more of an international view of the business.
There’s no reason why we shouldn’t be strong in America, too, though. That’s our mission. We’re going to have all those good things in the rest of the world, but we’re also going to be stronger and stronger in America as well.

Do you feel the proliferation of legitimate online download services is stemming the rise of piracy and illegal file-sharing?
There is a whole raft of things we’re doing that are starting to work. Obviously, having a legal alternative is a must if you’re going to try to wean the public from the illegal services, which is basically stealing, and on to legitimate services. The RIAA lawsuits in the U.S. and now, starting in other countries, as well as the things we’re doing with the colleges and universities, giving them an affordable alternative, are all helping. The education program we have out there… It’s all starting to pay off. The public is beginning to realize P2P file-sharing has some very serious consequences. Do you want your children doing something that is basically illegal? I think we’ve gone past the days of Johnny Clever upstairs working on his computer, doing something he shouldn’t be doing. Most respectable, middle-class families would want nothing to do with file-sharing if they knew it was wrong.

Do you see the area of ringtones and ringtunes being big profit centers in the future?
It’s barely begun in Europe and hasn’t even begun in America. We’re beginning to see significant business in Asia and Japan, mainly on ringtones up until now, but soon the actual ringtunes as well, which represent a profit for the record labels, who own the mater recordings, as opposed to the publishing companies. Ringback and all the different mobile applications are also about to arrive. They’re all very attractive offerings. Last year, revenue from all non-physical uses of music tripled, from $8.5 million last year to $26.25 million this year.

Music DVD is also a growth area.
DVD is another area on the move. Our business doubled around the world. There’s obviously more growth to come. There are some real bright spots in the business.

EMI gave up its manufacturing facilities last year. What do you see as the future of physical product?
I don’t think there’s a light switch coming, where suddenly all the record shops close down one day. It’s very hard to give your mum or your girlfriend a CD you burned on the Internet as a birthday present. There are lots of people who want the packaging and the actual physical product.

What’s your take on the continuing consolidation of the business, specifically the proposed Sony-BMG merger?
No comment. Personally, I’m not concerned if there are four companies left. I think EMI has its own destiny worked out. We have enough scale to be profitable and can stand alone on our own two feet.

EMI is prepared to move forward on its own, without partners.

How are you doing personally?
I’m having a ball, a great time. We are doing well in America. I don’t care what anybody says about us. We’re trying very hard. We’re being very realistic and using a healthy dose of common sense in what we’re doing. I don’t like a lot of the excesses in the business by nature. It’s not me. We have a much more lean, working machine.

Have you set any company goals?
I measure it all in breaking artists. Of course, we want to be profitable, we want to keep our numbers up, we want to keep the business healthy. But it all comes down to developing artists. The next one to watch is Houston. Yellowcard is going to explode this summer. Joss Stone will have a huge second album. Lenny Kravitz is out this week, and the Beastie Boys will be massive. We’re into our records. That’s what I do all day long. Work on breaking artists.

Where are you on the Janet Jackson album? It seems to have sputtered here in the States.
It’s doing pretty good worldwide. We’re in between singles, so it’s a bit of a lull. This next single is very important to us. It has to be a hit. She’s doing a lot of work. She was just out in Japan, performing on MTV Asia, where she got a standing ovation. Janet is a superstar. She’ll be fine. There’s a long way to go on this record yet.

EMI’s net loss this year is due to one-time "exceptional write-off charges," such as eliminating manufacturing.
It’s what happens when you rebalance your business in line with the market. You have to look at the overall trading performance last year. That’s where all the signs are. We moved from a business dependent on volume to one that doesn’t have to take that risk anymore. Now, Cinram does. Basically, they can manufacture a lot more cheaply than we can. The savings will come over the next couple of years. But you take the hit right now because that’s the accounting rules.