EMI has revealed that revenues from CD sales have dropped by nearly a fifth.

The group's recorded music arm, home to stars such as Robbie Williams and Lily Allen, reported a 19.8 per cent fall in revenues from CD sales in the three months to the end of June, as digital downloading continued to steal market share.

But EMI offered hope that it was beginning to take advantage of the switch to digital as it posted a 26 per cent rise in digital revenues. The group, which is being taken over by financier Guy Hands in a £2.4 billion deal, said the continued tough conditions in the recorded music market meant overall revenues for the division fell by 13.4 per cent.

It also blamed the drop on a poor release schedule.

A stronger performance in its music publishing arm, which saw revenues rise by 11.9 per cent, failed to lift overall figures, down 5.1 per cent over the past four months.

CD sales have been falling steadily in recent years as music downloading has taken off.

EMI reported that CD sales fell by 12 per cent in the UK and Ireland in the year to 31 March. Industry-wide, the fall was 8 per cent.

Music labels have been battling against digital piracy and the drop in demand for physical formats, hoping to instead capitalise on downloading with online download services.

EMI launched a venture with iTunes in May that offers music to be downloaded without the digital rights management codes that restrict use.

The group said yesterday: "Early revenue indications for this initiative are encouraging."

EMI's music publishing arm is "holding up well" with digital revenues up 13.2 per cent andphysical sales 11.9 per cent ahead.

EMI's music publishing arm was said to be the main attraction in the deal with Guy Hands and observers have speculated that he may try and strike a deal with Warner Music, which lost out in the battle to secure EMI, to offload the ailing recorded music division.

Fellow British music label Chrysalis is also thought to be receiving significant attention from bidders interested in snapping up its publishing business. Universal Music, Warner Music and a raft of private equity firms are believed to be in the frame.

From Scotsman.com