Will There Finally Be A Wedding?

Warner Music Corporation has once again approached EMI in an attempt to merge. The suggestion was brought up again by Warner Music Tuesday, February 20^th, but no proposal has been delivered yet for the EMI board to start negotiations. This will be the fifth attempt to merge in the past seven years, following four failed attempts. The last merger proposal from the previous year was valued around $4.9 billion. It in unknown what the value currently would be, but the news alone of the possible merger caused EMI’s shares to increase by 13% on Tuesday, making EMI worth around $3.71 billion.

The merger comes in an effort to decrease business risks for both companies and to save costs. Labels have been hurting with all of the increased digital downloads, many of them illegal downloads. New measures are now being taken to stay afloat in the industry. EMI is even considering selling mp3s online without DRM. This way new music will be heard by more people, since customers would not be restricted to playing purchased music on specific mp3 players. More flexibility with music purchases would hopefully introduce more people to the latest music, and encourage CD sales. This is much needed, considering that both EMI and Warner Music have had decreased CD sales in the past year. Warner Music claims that its net income had a 74% decrease during the last three months last year.

Despite past failed attempts, EMI and Warner are hopeful that this merger will be cleared by the European Commission. The merger has gained the support of the Independent Music Publishers and Labels Association, which should help the merger to be approved (“Warner Music Makes Another Bid for EMI”).

Consolidation seems to be a trend in the record industry, as major labels try to compete with Vivendi’s Universal Media Group. Earlier this year EMI consolidated its Capitol and Virgin labels in the US to create Capitol Music Group (“What’s old is new again-record label consolidation”). Their main reasoning behind this is to prevent the releases of artists who all sound the same, and to better focus on upcoming talent. True, labels do need to focus on the content of their releases, but merging does not seem to be the answer. It seems rather the road towards further limiting content that is released. With tight budgets and layoffs caused by mergers, labels will most likely only want to put their limited funds into guaranteed successes. This means less diversity in music, and better chances that the music released by major labels will sound even more similar. Newly signed talent will be practically ignored, as the focus will have to be on established talent which provides less risks, and a lesser chance of losing the label’s money. As artists from merging labels are placed under one label, the newer artists will be even less likely to stick out in a huge roster. This means that the new artists will not be nurtured and promoted, as money is spent on promotion of larger artists. According to Kelli Richards’ article on record consolidation, the biggest act on EMI is the Beatles. This is troubling, considering the group was introduced years ago, meaning EMI has yet to focus on developing any new major artists since. Richards even suggests that with the popularity of digital downloads, labels may focus on earning money from singles rather than entire albums. This means a potential for an even further failure to develop artists. Rather than focusing on putting out multiple top selling albums by one artist, labels will just have to worry about a successful single from multiple artists.

These mergers could be part of the reason behind the lack of good releases and shrinking CD sales for major labels. As releases from major labels that are playing it safe start to sound too similar, the Indie labels are where the public turns to for new music. There are also MySpace, and other online sites to find new music that is unique. Listeners are slowly turning away from major labels to find new music, and are grasping for the latest trends from other sources online. The record labels are once again focusing on mergers, and getting more out of touch with what their listeners want.