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Main >> News Listing >> June 2004 >> Article ID 5231
 Music business quartet to become a trio? | Type: Internet Article |
| | Music business quartet to become a trio? | Jun 21, 2004 | by Jeffrey Goldfarb
Summary:
Sony BMG, as the New York-based company will be known if the merger is completed, would hold 22.6 percent of the market with BMG artists Christina Aguilera and Santana and Sony's Bruce Springsteen and Ozzy Osbourne. It would trail only Universal's 23.5 percent share, according to 2003 data released last week. EMI has 13.4 percent and Warner 12.7.
Read on for the whole article. |
LONDON (Reuters) - With the record industry soon to be fronted by a quartet, the backstage chatter has started about whether a trio might not make sweeter music.
BMG and Sony Music are poised to merge with the blessing of antitrust regulators, creating a clear number two to Universal in a four-horse field, leaving rivals EMI and Warner Music at about half the size and leading to fresh speculation among industry executives that they will renew talks to combine.
"If the regulators can put a merger through like Sony-BMG, it opens up another option for EMI and Warner," one music industry source said.
EMI, with a roster that includes Norah Jones, Coldplay and Kylie Minogue, has sought to buy or merge with one of its rivals over the years, even as it has said it is content to stay independent each time one of the deals fell through.
Entertainment mogul Edgar Bronfman Junior, who led the group that bought Warner Music last year for $2.6 billion (1.42 billion pounds), will eventually will face internal pressure to merge, however, beyond the industry's shrinking sales and continuing piracy problems.
He will have to satisfy his financial backers, the private equity firms Thomas H. Lee Partners, Bain Capital and Providence Equity Partners, who will want to cash out in due time.
"While they are unlikely to press the EU immediately for a merger, we believe a deal with EMI would provide an obvious exit route for private equity partners," Bear Stearns analysts wrote on Friday.
A merger between EMI and Warner, home to such artists as Madonna and Seal, would have global market share of 26 percent "and although problems could arise in Europe with a share of 30 percent," the analysts said, "we believe these could be addressed through small disposals."
Industry executives and other analysts say, however, that an initial public offering is a more likely exit strategy for Warner Music's investors.
People close to both EMI and Warner refuted the idea that any talks were in the works between the two companies. Spokespeople for both declined to comment on market speculation.
SIX, FIVE, FOUR...
Sceptics doubted six years ago that regulators would allow the music industry to shrink to five players from six and they were even more wary a move from five to four would be permitted. That is why some people have a very tough time seeing the field shrink to three any time soon.
"I think the market will stay at four for quite a number of years," predicted Simon Dyson, an analyst at Informa Media.
"Everyone said six to five was crazy when Universal merged with Polygram, and that going to five from four was ridiculous, which you could, in fact, argue was going too far," he said. "Four to three would be a step too far."
Sony BMG, as the New York-based company will be known if the merger is completed, would hold 22.6 percent of the market with BMG artists Christina Aguilera and Santana and Sony's Bruce Springsteen and Ozzy Osbourne. It would trail only Universal's 23.5 percent share, according to 2003 data released last week. EMI has 13.4 percent and Warner 12.7.
EMI, Warner and BMG all gained market share over the past year, taking it from Universal, Sony Music and the independents. Sony Music is a division of Japan's Sony, BMG a unit of Germany's Bertelsmann and Universal a part of France's Vivendi Universal.
European antitrust regulators, who initially had argued that there is tacit collusion among record companies on some CD prices, are ready to approve the merger of Sony Music and BMG, people familiar with the situation have told Reuters.
That could mean that EMI and Warner, along with the independent labels, will have to scrap harder with retailers for shelf space and will have less money than Sony BMG and Universal to invest in new talent and technology, other factors that could fuel a need for the two companies to combine.
EMI boasts that as an independent player its margins are superior to those of its bigger rivals despite the potential cost savings from a merger, which it has pursued several times over the past few years.
"EMI's got a great strategy in place based on cash management and only investing in profitable artists," Investec analyst Kingsley Wilson said.
"Size isn't that important in the music industry," Wilson said. "It's about the quality of the music you put out." |
 Source: Reuters | |
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