Merge With Caution

Speculation has been rife for at least a year, but yesterday Sony and BMG agreed to merge music units. Warner Music Group and EMI are talking. And then there were three?:

Sony Music and BMG on Thursday said they plan to combine their music units in a move that could trigger further consolidation as the industry grapples with weak retail sales, online file-sharing and fierce competition with other forms of entertainment.

The 50-50 joint venture combines No. 2 Sony, which includes such artists as Beyonce Knowles and Bruce Springsteen, with No. 5 BMG, a unit of German media firm Bertelsmann that is home to Britney Spears and Elvis Presley. It creates a powerhouse that rivals leader Universal Music Group.

The deal vaults the companies ahead of Time Warner Inc.’s Warner Music Group and EMI Group Plc, which are discussing a combination of their own.

“If (Sony and BMG) stood alone, we would have to cut artist rosters and even closing activities in smaller countries,” said BMG chief executive Rolf Schmidt-Holtz. “This merger is the best guarantee that we can maintain a broad roster of artists in the current environment.”

….A final agreement, which will exclude the companies’ publishing and manufacturing operations, is expected within several weeks, after which it will go before competition watchdogs on both sides of the Atlantic.

….by excluding the publishing and manufacturing business, the deal was likely to have an easier path to regulatory approval.

Sony BMG would rival market leader Universal Music’s 25.9 percent share of global music sales, with a share of 25.2 percent based on 2002 sales, while a combined EMI-Warner Music would have 23.9 percent. [Reuters]

Net result? Lots of lost jobs. Is it really necessary for survival? Only because htye have all been so flipping stupid.