Outlook: EMI and the net

AS CHIEF executive of United Biscuits, Eric Nicoli had an unhappy time. The shares crumbled like a dodgy Hob-Nob almost from the moment he thumped into the hot seat. He'll be hoping things are different at EMI. A surprise choice as successor to Sir Colin Southgate as chairman, Mr Nicoli has found himself swapping a dull and declining company in a mature industry for the fast-growing entertainment and new media industries. Instead of dealing with hard-driving supermarket customers every day, his only headache now is cocaine-snorting musos and Internet junkies. Rarely do senior executives get such an alluring second chance to prove their worth.

Mr Nicoli certainly joins at a fascinating time. The bear case for EMI is that the music company majors will find themselves outmanoeuvred by the Internet. The theory is that the web will lead to mass piracy and "disintermediation" as music acts bypass the recording giants and sell their wares direct to the public via the internet.

The more optimistic case for EMI is that the Net will only expand the market for the majors by enabling them to reach a wider audience that either has specialist tastes not catered for in shops or to those in remote areas. Importantly, EMI has pledged to keep working with its existing retail network and not to by-pass it by selling direct.

EMI's Internet strategy, which was being developed before Mr Nicoli loomed into sight, is an interesting one. Rather than invest huge sums in buying up Internet companies, it has used its back catalogue as a licensing currency. In return for making this recording "content" available it takes a stake in its target.

Unlike most new media ventures, EMI finds itself in the happy position of already making a profit - of pounds 25m in the latest half-year period - from its Internet "investments". Longer term EMI may still end up as the music division of a larger group such as Disney and Time Warner, or simply trumped by the netheads. But its strategy looks plausible and Mr Nicoli may silence his critics yet.