Nearly three years after EMI, whose artists include Robbie Williams and the Beatles, was bought by private equity firm Terra Firm for £4.2 billion ($US6.5 billion) including debt, it looks like the company is about to go bust, the first high profile casualty of the music industry shakeout.

The Financial Times reports that EMI's auditors have expressed concern about the company's ability to continue as a going concern because of the enormous debt load. Guy Hands, Terra Firma's founder and chairman,has to go cap in hand to private equity firms to raise $120 million and then try to sweet talk Citigroup into restructuring its loans.

When you think about it, Terra Firma is a victim of its own bad timing. It bought EMI in May 2007, just months before the markets started to collapse. At the same time, people stopped buying CDs. Free downloading took over and, along with its rivals, EMI struggled to cope with the International Federation of the Phonographic Industry estimating that 95% of music downloads worldwide are illegal and worldwide music sales falling 30%.

Can the music industry survive? Most definitely yes!! New statistics show that despite the drop in CD sales, the industry is actually growing with global sales via the Internet, mobile phones and other digital methods rising 12% last year to $4.2 billion. Add to that concerts and merchandise, ringtones, licensing for commercials, TV shows and movies and even vinyl singles, and you would say that the industry is growing.

The mistake that labels like EMI have made is taking too narrow a view of what industry they're in. It just takes imagination and creativity, something that they don't share with the artists.