EMI, the record company behind The Beatles and Lily Allen, delivered its third set of poor trading figures this year – but Terra Firma, the incoming owner, said that it was “comfortable” with the 5.1 per cent decline in quarterly revenue.

The British music group blamed “tough market conditions”, although its numbers trailed both Universal and Sony BMG, as EMI underperformed an already weak global music market, revealing the scale of the challenge facing its private equity owner.

Turnover at the flagship recorded music unit tumbled by 13.4 per cent, in a quiet three-month period in which EMI put out few new releases – those that did come out included albums from Interpol and The Chemical Brothers – as the company held key releases back for the run-up to Christmas.

Universal, the Vivendi-owned market leader, managed to keep its like-for-like revenue decline down to 0.8 per cent. Sony BMG – which is only in recorded music – reported a 0.3 per cent improvement. Warner Music reports today, amid expectations that its performance will be closer to EMI’s than its other rivals’.

Terra Firma, which is the process of completing its buyout of EMI, said that the weak quarter was “in line with expectations” as it prepares to assume control of the struggling company next month. EMI has already issued two profits warnings this year.

In the first half, album volumes were down 9.3 per cent in the United States, the world’s largest market, even with digital downloads included. In Britain, the third-largest market after Japan, total volumes were down 7.7 per cent. EMI’s recorded figures paint a similar picture. A 26 per cent increase in digital revenues and the introduction of higher-priced copy-protection-free downloads via Apple’s iTunes were not enough to offset a painful 19.8 per cent decline in CD sales. Nevertheless, the company hopes that pre-Christmas releases from Kylie Minogue and the Spice Girls will improve the picture.

The stronger music publishing unit grew by 11.9 per cent in the quarter, helped primarily by various copyright litigation settlements. No figure for publishing’s underlying performances was given.

Terra Firma, run by the financier Guy Hands, is expecting to complete its £2.4 billion offer in September, with one of its partners Stephen Alexander, the former Allied Domecq executive, poised to take principal responsibility for the company. Mr Alexander may become chairman, although Terra Firma also wants an operational chief executive.

That could be Eric Nicoli, who has run EMI either as chairman or chief executive for eight years, although the private equity firm is looking at other candidates, with Roger Ames, the former chief executive of Warner Music who now works for EMI, the most obvious alternative. Rival music majors say that they are not aware of any other candidates being sounded out, but a recruitment process is still in its early stages.

Terra Firma is not planning to unveil its strategy for EMI for several months, although insiders said that there were “no current plans for a back-to-back transaction with Warner Music”.

EMI and Warner Music have tried repeatedly to merge, a deal that is still seen as inevitable despite seven years of failed attempts.

In charts

Highest-placed EMI releases this week:

UK single No 10 Plain White Ts, Hey There Delilah

UK album No 15 Korn, Untitled

US single No 45 Mims, Like This

US album No 1 Various Artists, Now 25*

*Also Universal and Sony BMG

Source: Music Week, Billboard

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