Music head declares WMG-EMI deal dead

Warner Music chief Edgar Bronfman Jr. sees big changes in the next few years as more advanced handsets make it easier to download music and video while advertising becomes a bigger piece of WMG’s revenue pie.

He also said he thinks it could be as late as next fall before an EU ruling on Sony-BMG offers clarity on whether another music merger would be possible. Until then, talks between WMG and EMI are dead (with EMI said to be negotiating a sale to private equity group Permira).

Looking ahead, “The distinction between download and mobile will go away. There will be seamless integration” between devices such as computers and cell phones, Bronfman told investors at CSFB’s media conference in Gotham.

And Apple’s iTunes won’t have a monopoly forever. As handset makers and telephone carriers step up to the plate, “Our distribution won’t be as focused on a single customer in two to three years as it is today,” Bronfman said.

“We had basically been releasing content on the same platform for 25 years,” he added, “and we have to pick up the pace of technological innovation.”

He said WMG will introduce DVD albums with both high-definition video and high-resolution audio next year.

WMG, he said, continues to focus on costs, finding new artists, building up music publishing and studying its balance sheet to determine where to best invest its cash — the latter making for some tough decisions.

“We are an incumbent company in a transforming industry. Incumbent companies have a record of under-resourcing the new business and investing in turning around the core business — with the turnaround always just around the corner,” he said.

WMG is spending more on the new business and less on the old. “We have to make those choices and decide where we want to grow,” Bronfman declared.

Queried about EMI, he said the issue in the odd back-and-forth negotiations last summer wasn’t price but the fact that Warner felt its shareholders would be better served by buying EMI rather than the other way around.

Bronfman said the company would have used cash, not stock, for EMI or any major acquisitions in order to avoid diluting the holdings of its stockholders, which include a group of private equity firms.

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