EMI Music is in talks to outsource the "pick, pack and ship" portion of its U.S. distribution operations to physical retailers, according to a source familiar with the situation.

The source said EMI's U.S. sales and marketing operations aren't part of the outsourcing discussions, as online reports suggested Friday, nor is digital distribution part of the talks.

The talks represent the latest move by major record labels to scale back their physical music operations at a time when sales of compact discs continue to tank. For instance, EMI has already outsourced its CD manufacturing operations in the U.S., as has Universal Music Group.

In September, EMI outsourced its distribution and marketing operations in a string of Southeast Asian markets to Warner Music Group. The multi-year licensing agreement turned over services in Hong Kong, Malaysia, Singapore, South Korea, and Thailand.

And in July, EMI struck a deal to outsource its distribution facilities in the United Kingdom to European logistics firm CEVA beginning in the spring of 2009.

EMI's moves to outsource distribution also come a time of financial difficulties for the company, the smallest of the four major labels. On Oct. 24, British private equity fund Terra Firma, which acquired EMI last year, revealed that EMI Group posted a pro forma loss of £757 million ($1.5 billion) during the year ended March 31, widening from a loss of £287 million ($572.6 million) in the prior year.