Independent music group Chrysalis Plc says the economic downturn will impact on its publishing revenues, as declining physical sales reduce mechanical revenue and a slowing advertising market affects synch income.

The London-based group, whose publishing roster under Chrysalis Music includes Estelle, Portishead, David Bowie, Gnarls Barkley and The Raconteurs, has announced an interim management statement for the third quarter. It is anticipating a loss of around £1.2 million ($1.7 million) for the year, compared to an operating loss of £3.1 million ($4.5 million) in 2007.

Chrysalis says the start of the second half of the financial year - the period covering April 1 to June 30 - saw chart successes result in a 12.8% increase in its Net Publishing Share (NPS) revenues compared to Q3 in 2007. But for the ten-month period, the revenue figure is 2.9% down on the previous year, due to uncertainty caused by the failed offer process. The company turned down a £104 million ($152 million) offer from EMI in April.

"Portishead and Pendulum did pretty well for us," group finance director Andy Mollett tells "But Gnarls Barkley was a bit of a disappointment - having had such a huge first album ["St Elsewhere"], the second one ["The Odd Couple"] was going to be a bit tricky."

He adds, "There was nothing spectacular, we have not had a huge single or sustainable No. 1 album."

Chrysalis says it expects its publishing revenue (NPS) to be down on last year's £11.9 million for the 13-month period to Sept. 30, blaming a quiet period for new releases in the final quarter and the economic downturn impacting on physical sales and synchs. The interim statement did not disclose value figures for publishing revenue, but Mollett says he expects a 7-9% decline, adding that the failed offer process was "very difficult" for the company.

Chrysalis has also decided to restructure its Echo label as an "exploitation company" similar to the Chrysalis Copyrights business, focusing on masters and catalog. The label's incubator model failed to 'upstream' any artists to major labels this year in line with the previous success of Bat For Lashes and Ray LaMontagne.

The restructuring follows a review of the non-publishing business after the company's failed offer process, and the company says Echo has performed below expectations, resulting in higher write-offs for new unproven artists. Between three and four members of staff positions have gone due to the Echo restructuring, says Mollett.

Chrysalis has previously announced it is pursuing a 10% reduction in staff across its publishing operation worldwide. However, Chrysalis Music has recently signed White Lies and Laura Marling and the company says it believes new artists and its catalog will return to NPS growth in the medium term.

Wholesale arm Lasgo Chrysalis remains on track to exceed the company's expectations for the year.