The importance of ancillary revenue streams and continued consolidation - either within a company or between two companies - were some of the ongoing trends spotlighted in the most recent round of earnings reports.

As companies manage the transition of their businesses in the digital age, most are still involved in a waiting game in 2009. Labels and publishers are waiting for physical and digital sales to intersect and bring stable revenues (album sales are down 13% this year, CDs alone down nearly 20%, according to Nielsen SoundScan). They're waiting for a new breed of digital service providers, a new round of products to breathe life into recorded music and bring it to more consumers. Similarly, they're throwing all sorts of mobile services at the wall to see what, if anything, sticks. Live Nation and Ticketmaster are waiting for the Department of Justice to approve or deny the proposed merger. And both are waiting for their long-term strategies to bear fruit.

Concurrently, artist services are becoming more important for many companies. Some need to offset losses in recorded music and the related drop in publishing revenue. Others see artist services as a road to competitive advantage. Ticketmaster has the most well known of the group's artist services by way of its merger with Front Line. Live Nation's multi-rights contracts are part of its plan to reap extra value from the artist-fan relationship. The Orchard, on the other hand, is using marketing and music supervision services to bring greater value to the labels it distributes. EMI Music has expanded its licensing and sponsorship to include artists not under contract - a pure service model. And Warner Music Group has a very well rounded diversification program that includes management, agencies and merchandise.

From a financial point of view, two of the majors stand out the most and for different reasons. WMG is looking particularly strong while EMI is still relatively weak. The divergence of their paths could lead them toward one another. Since WMG's recent bond offering, which offers it more flexibility by extending the maturity its long-term debt, all eyes are once again on a WMG-EMI courtship. A tie-up is hardly certain, however. The industry will still be prone to shocks in the coming years and it's difficult to predict how market forces will shape the competitive landscape.

WMG showed resilience in its Q2 ending March 31, though its strategy is still years away from showing substantial gains. Its position has been strengthened by putting cash on the balance sheet, disbursing some assets, merging its Ryko and ADA distribution divisions and, most importantly, issuing $1.1 billion in senior secured notes to rework the timing of its debt and give it much-needed financial flexibility. WMG had added revenue and market share by paying $67.5 million for Ryko in May 2006 and $73.5 million for the remaining 73.5% of Roadrunner Records in December 2006. As capital expenditures have been reduced, the lack of organic growth will become more noticeable. With its bond issuance, WMG is in a good position to address the need for growth. It's share price is up 28.5% in the last month.

EMI's improvements - and there have been many positive steps - require a big asterisk. Even taking into consideration the vigilant cost-cutting and thoughtful changes to its organizational structure, EMI's improved operating margin is no surprise given the low-hanging fruit of the post-Munns-and-Levy era. The company that the former executives left had ample room for operational and managerial improvements. As a result of these improvements, cash flow from operations in Q1 2009 improved to £190 million (US $313 million) from the previous year's outflow of £148 million (US $244 million). EMI's inability to improve market share, however, is troubling given the company's turnaround efforts. Ultimately, one of the most important tests of a music company is its ability to take market share from its competitors. EMI will prove its mettle after it has cleaned up the most obvious messes (Before being acquired by Terra Firma, EMI was not as observant of costs as it is now. A report on EMI by Maltby Capital for the fiscal year ending March 31, 2008 admitted the company had "a culture where high expenditure at odds with the challenges it faces was widely accepted." Problems with inventory and compensation structures have been remedied. EMI's internal reporting was also identified as a weakness.).

Universal Music Group's Q1 revenue was €1,026 million (US $1,452 million), down less than 1% from the previous year, and EBITDA was flat at €110 million (US $156 million), down 6.2% at constant currency. The company's artist services and merchandise revenue grew 9.3%. Since the end of the quarter, UMG acquired Univision Music Group.

Sony Music Entertainment's recent results were the worst of the four majors. For the six-month period ending March 31, 2009, Sony Music had a 16% drop in pro-forma revenue on a U.S. dollar basis. Operating income was down 50.1% to $310 million for the fiscal year ending March 31, 2009.

Live Nation's Q1 2009 was marked by an unstable North American marketplace and gains in per-head spending as well as revenue per fan. It posted an $84.4 million operating loss for the quarter on $499 million in revenue, a 6.3% decline. Live Nation's share price is up 27.3% in the last month.

Ticketmaster's recent earnings report showed the company trying to fill gaps left by the loss of Live Nation ticketing volume. The company's ticketing revenue dropped 3% to $339 million while total revenue was up 7% to $374 million due mainly to its merger with Front Line. Ticketmaster's stock is up 32.7% in the last month.

Overall, the industry has made only small bits of forward progress in the past year. Downloads still dominate the digital marketplace. iTunes is still king while Amazon.com quickly become a formidable runner-up. Ad-supported Internet services have had difficulty finding a workable business model, although recent proclamations by Pandora and the immediate success of Spotify give the segment more reason for hope than previous developments. Mobile is as great an unknown as it was last year. Ringtones are becoming passé and next-generation services are still in their infancy.

Even though monetary gains are rare, the last two years have not been for naught. Throughout the industry there has been a far greater urgency to counter debilitating trends and reshape for the future. Vevo, a partnership between YouTube and Universal Music Group, may provide a template for monetizing the incredible volume of video streaming. Announcements yesterday by Live Nation and Sony Music show much-needed development in pricing strategies that targets the most price-sensitive consumers and wisely places profits over margins. (One day a week, Live Nation will waive service fees on million of amphitheater lawn seats, and Sony Music will begin selling some catalog titles at eMusic.) Companies have cut and managed costs, reshaped organizational structures and brought in new leadership (with mixed success). And given the challenging economy, companies' middling earnings results show effort is not in short supply.