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​CME Management Rebuilding As First-Half Sales Drop

Billboard, 11.16.02
Steve McClure

TOKYO - Despite a drastic drop in sales in the first half of its financial year, Columbia Music Entertainment (CME) should be on its feet again soon, according to chairman/CEO Strauss Zelnick.

The company (formerly known as Nippon Columbia) reported sales of 13.2 billion yen ($108.1 million) for the fiscal half-year to Sept. 30, down 68.6% from the corresponding period of 2001. CME also reported a first-half ordinary loss of 923 million yen ($7.5 million) and after-tax losses of 1.5 billion yen ($12 million).

"It is not possible to do a year-on-year comparison, because the business has changed so much," New York-based Zelnick says. "Specifically, the hardware business was spun off. We also disposed of various non-core businesses, including our retail stores, a service company, and other assorted investments."

As well as the generally depressed Japanese market, Zelnick says the decline in first-half sales reflects CME's "disciplined" release schedule. He adds, "We have also experienced the slippage normal in the early stages of a creative regeneration of a label."

Not everyone agrees with Zelnick's optimism. "I do not see any hope for a turnaround in the immediate future," one industry source says. "It could take three to four years of constant bloodletting. First and foremost, the company needs to cut its enka [traditional-ballad] ties," the source adds, claiming most people perceive CME as "old-fashioned."

CME has been restructuring since May 2001, when New York-based investment firm Ripplewood acquired a controlling interest. Ripplewood named former BMG Entertainment CEO Zelnick chairman of CME and split off hardware division Denon as a separate company.

For the full year to March 2003, CME projects sales of 29.5 billion yen ($242.2 million), an ordinary profit of 300 million yen ($2.5 million), and an after-tax loss of 1.3 billion yen ($10.7 million).