Sony back in the running for music industry merger
Just six weeks ago it looked as though EMI and AOL Time Warner would be the first of the music giants to strike a deal as part of the anticipated consolidation in the industry.
But today Sony Music and the recording division of German-owned BMG announced their intention to create a merged record company – Sony BMG – that could take on market leader Universal Music.
Details of the deal are still being discussed and the merger will have to go before the competition authorities.
However, the agreement appears to put Sony and the Bertelsmann company in a better position than their rivals. EMI hopes to take over the recorded music division of the Warner Music Group, with an offer that is rumoured to be worth $1.5bn – around £910m. Such a deal would make the new company the world’s second biggest music firm, with 24% of the global market – based on last year’s sales.
The Sony-BMG merger would command a bigger market share of 25.2% – just 0.7% off Universal’s position – and would bring together top artists such as Beyonce Knowles and Britney Spears.
With falling sales and competition from internet downloads and international piracy, analysts agree that mergers are needed in the business, and any deal is likely to include major cost-cutting measures.
But the Sony deal – if successful – could stand in the way of an EMI-Warner merger: a deal between the two failed three years ago because of concerns about European trade regulations, and commentators have suggested that any competition authority would be unwilling to see the industry contract from five big players to just three.
