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Rumours

I love it when there are billions and billions of our entertainment dollars at stake!

Merger Reports Sweep Through Music Industry
LONDON (Reuters) – The familiar tune of merger rumors swept through the music business again on Monday when a report suggested AOL Time Warner and Bertelsmann were in music merger talks to secure a future in the battered industry.
The Wall Street Journal said media giant AOL Time Warner Inc. and Germany’s Bertelsmann AG were discussing a possible merger of their Warner and BMG recorded music businesses, though a deal was still highly uncertain.
Facing an outlook of declining sales and escalating piracy, the smallest three of the big five music companies have been in repeated merger talks with one another in recent years in an effort to build bulk and cut costs to survive.
The Journal report cast gloom over EMI Group Plc, the world’s third-biggest music company, which has been in separate talks with both Bertelsmann and AOL in recent months, according to sources familiar with the situation.
EMI shares were 0.2 percent lower at 126-1/4 pence at 1040 GMT, after earlier falling as much as five percent on concerns that it could be left out in the next round of mergers.
“The valuation gap is likely to widen further over the medium term as it becomes evident that further restructuring is required in the face of ongoing revenue pressure,” ABN Amro said in a note, cutting its EMI rating to “sell” from “hold.”
Citing people familiar with the matter, the Wall Street Journal said talks had heated up between AOL and Bertelsmann, including at the highest levels. But the newspaper added that key issues such as valuation and management remained outstanding.
Bertelsmann declined to comment on the report.
“Lots of talks are going on throughout the music industry but we do not comment on speculation,” said a spokesman.
AOL Time Warner was not immediately available to comment.
AOL’s Warner Music ranks number four in the world with artists including Madonna and Linkin Park while Bertelsmann’s BMG ranks five with artists including Avril Lavigne and the Elvis Presley catalog. However, a combination would rival industry leader Universal Music in the key U.S. market.
Both AOL Time Warner and Bertelsmann separately came close to merging their music businesses with EMI three years ago but were confounded by European regulators who were uncomfortable with the world’s five biggest music companies shrinking to four.
However, the music industry has since shrunk and recent European rulings have led some to believe that regulators could be more open to a deal among the big five now.
The Journal suggested that AOL and Bertelsmann may strip their music publishing businesses out of the deal currently being discussed to smooth the passage through regulators.
While merger talks have focused on Warner, BMG and EMI, the world’s biggest music company Universal Music also recently held talks with Apple Computer Inc..
However, sources close to the companies say those talks have since cooled, although Apple may still be interested in taking a stake in Universal Music as part of an online deal.