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EMI sees holiday sales good in Europe, slow in U.S.

EMI Group Plc., the record company whose roster includes the Beatles, Janet Jackson and the Rolling Stones, said Wednesday holiday music sales are looking healthy so far this season in Europe, although still remain sluggish in the U.S. and Japan.

The music business has suffered this year particularly in the United States amid a weakening economy, exacerbated by the Sept. 11 attacks. The industry has also blamed part of the industry softness on piracy, both from illegal copies of compact discs and free download services like Napster.

“My impression is that the season is a little subdued in the U.S.,” Chairman Eric Nicoli told Reuters following a presentation at UBS Warburg’s media investor conference here Wednesday. “In Europe, business is faring quite well.”

Nicoli, who also heads the the international music retailer HMV Media Group, added that the Japanese economy was also struggling.

He expects music sales to grow in the single digit percentage range over the next five years, after which Internet distribution and other technological advances will accelerate that growth rate.

Until then, however, he acknowledged that EMI has its work cut out for itself, particularly in its recorded music division, which has been losing market share. The company warned in September that the company’s full-year profits would fall 20 percent.

The incentive-laden pay scheme of newly-appointed head of recorded music Alain Levy will depend on the company improving its annual pre-tax profit margin to 8 percent to 12.5 percent. “Addressing the under-performance in the U.S. will be a key to that,” Nicoli said. “But we’re confident that he can get into that incentive range.”

Levy has started a strategic review of the business, which is expected to be completed early next year. Nicoli declined to comment if such a review would include more layoffs above the 500 announced in September.

Nicoli reiterated that the company was considering leaving the manufacturing and distribution business and that advanced discussions were under way.

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