Emi Case Study

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EMI Case Study Executive Summary Rationale: The intention of this this case study is to determine how EMI should address their upcoming dividend payment. Ultimately, we are going to decide whether they should declare no dividend, continue their current dividend, or suspend their dividend. EMI Background: EMI Records has a storied history with many of the most popular bands of all time including The Beatles, Pink Floyd, Duran Duran, and many others. Their main source of revenue in the past has come from recorded music and music publishing- divided into two corresponding divisions. Their music catalog that consisted of more than 3 million songs that comes from their recorded-music division which included sales from both new and old recordings that made up 30-35% of sales. In the early 2000’s, with the launch of peer-to-peer file-sharing internet services that claimed 20 million users by July 2000. However, legally downloaded music was on the upswing but the music market continued to suffer losses due to the rapid decline in physical sales (a decline of 25% from 2000-2006). This steep decline in physical sales had drastically affected revenues- losses of 27% by 2006, and a consistent 6-10% decline thereafter. With a new restructure in mind, EMI management planned to make a joint announcement with Apple Inc.- being the first major music company to offer its digital catalog free from digital-rights management and a higher sound quality. This new service would sell at a 30% premium. Consequently, past decrease in revenue had strained the company financially, leading them to cut their current dividend payment from 8p-per share to a 2p-per share dividend. Theory: The main issue to address in when deciding if a company should declare a dividend is it’s financially feasible for the company to do so. However, there’re many other factors to include such as: *

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