The performance reflected the global decline In music Industry revenues, as well as the extraordinary cost of the restructuring program MI was pursuing to realign its investment priorities and Ochs its resources to achieve the best returns in the future. On an annual basis, MI has consistently paid an up-per-share dividend to ordinary shareholders since 2002. MI’S recent performance, Stewart questioned whether MI should continue to maintain what would represent a combined GAP 63 million annual dividend payment. Stewart recognized that MI faced considerable threat of takeover.

It seemed that boosting MI’S share price was Imperative, If Mel wanted to maintain Its Independence. The Dividend Decision The board already declared an Interim dividend of up per share In November 2006. Whether to maintain the past payout level by recommending an additional up final MI dividend be paid. Provided a forecast of the cash flows effects of maintaining the dividend based on market-based forecast of performance. Dividends are payments made by an organization to its shareholders from earnings generated in current or previous periods.

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Shareholders earn income from two sources, the capital gain due to appreciation of share and dividend yield. Dividend yield Is calculated by delving the current dividend by the price of a share. 2. 0 OVERVIEW OF MUSIC INDUSTRY ON 2007 MI, Warner Music Group, Sony BMW Music Entertainment, and universal Music Group, collectively known as “the majors” dominated the music Industry In the early 21 SST century and accounted for more than two-thirds of the world’s recorded music and publishing sales. Recorded music and music publishing were the two main revenue drivers for the music Industry.

Global music sales have been hit In recent years due to piracy and competition for consumer spending. Despite the growing popularity of digital music. Music’s share price has fallen to $4. 75, 72% lower than its PIP price in 2005, and it is Neighed down by debt. MI’S new private-equity owner, Terra Firma, paid a high price for the business in August 2007. Now, having got rid of most of MI’S senior managers and revealed embarrassing details of their spending habits (IEEE,OHO a Hear went on sundries euphemistically referred to in the music business as “fruit and flowers”), Terra Firma is due to produce a new strategy later this month.

But many Observers reckon the private-equity men are out of their depth. Ere two biggest majors-?universal, which is owned by Veined, a French conglomerate, and Sony BMW, a Joint venture between Sony and Bertelsmann, a German media firm-?derive some protection from their parent companies. Universal IS the strongest and is gaining market share. But people speculate that Bertelsmann may want to sell out to Sony next year. Three vicious circles have now set in for the recorded-music firms.

First, because sales of CDC are tumbling, big retailers such as Wall-Mart are cutting the amount of shelf-space they give to music, which in turn accelerates the decline. Richard Greenfield of Pail Research, an independent research firm, reckons that retail floor- space devoted to CDC in America will be cut by 30% or more in 2008. The pattern is likely to repeat itself elsewhere as sales fall. Ere results from 2007 confirm what MI’S focus group showed: that the record Industry’s main product, the CD, which in 2006 accounted for over 80% of total global sales, is rapidly fading away.

In America, the volume of physical albums sold dropped by 19% in 2007 from the year before-?faster than anyone had expected. For the first half of 2007, sales of music on CD and other physical formats fell by 6% in Britain, by in Japan, France and Spain, by 12% in Italy, 14% in Australia and 21% in Canada. Sales were flat in Germany. Paid digital downloads grew rapidly, but did not begin to make up for the loss of revenue from CDC. More worryingly for the industry, the growth of digital downloads appears to be slowing.

Second, because the majors are cutting costs severely, particularly at MI and Warner Music, artists are receiving far less marketing and promotional support than before, Inch could prompt them to seek alternatives. Third, record companies face such hostile conditions that their backers, whether private equity or corporations, are lots to spend the sums required to move into the bits of the music industry that are hiring, such as touring and merchandising. The majors are trying to strike “360- degree” deals with artists that grant them a share of these earnings.

But even if artists agree to such deals, they will not hand over new rights unless they get better terms on recorded music, so the majors may not see much benefit overall. Tim Renee, a former boss of Universal Music in Germany, says the majors should have acted years ago. Ay mid-2007, when the majors realized that digital downloads were not growing as Perhaps the most important experiment of all is a deal Universal struck in December tit Monika, the biggest mobile-phone maker, to supply its music for new handsets that will go on sale later this year.

These “Comes with Music” phones will allow customers to download all the music they want to their phones and PC’s and keep it-? even if they change handsets when their year’s subscription ends. Instead of charging consumers directly, Universal will take a cut of the price of each phone. The other majors are expected to strike similar deals. Paid-for download services will continue and ad-supported music will become more widespread, but subsidized services where people do not pay directly for music will come by far the most popular, he says.