EMI, BMG still hope to duet

Music congloms await EC's reaction

Despite signs that a merger between EMI and BMG is quickly unraveling, the would-be partners are holding out for a last-minute positive sign from European regulators.

“Everything’s open at the moment,” a rep for BMG parent Bertelsmann said Monday. “We are hoping to have a positive signal from Brussels this week.”

Reports surfaced Monday that the two music behemoths would call off their merger sometime this week.

The deal hinges on whether the European Commission’s competition authority would give its approval, demand concessions or outright nix it because of worries about excessive market dominance.

Bertelsmann is apparently looking for the EC to give the two label groups a sense of which way it is leaning within the next few days. However, since no formal terms have been laid on the table as yet, the commission isn’t obligated to make an official ruling.

Previous deal scuttled

All it took was fear of a negative review from the Euro regulators to scuttle a similar deal between EMI and Warner Music in January — despite the two companies having spent $60 million trying to make it work.

Among the anticipated EC concerns was the combination of EMI’s substantial size with the formidable distribution muscle of the AOL Time Warner conglom.

The EMI-BMG tie-up doesn’t necessarily pose that problem, but it would still reduce the number of global music players to four from five, and give the combined company a substantial concentration of share in Euro markets — perhaps even greater than that of a united EMI-Warner.

“You’re looking at the exact same type of concerns as Time Warner-EMI with the issues of collective dominance,” said a source familiar with the European regulatory proceedings.

EMI and BMG have explored myriad configurations for the deal in an effort to please regulators since talks were announced in November. These include the sale of EMI’s Virgin Records and BMG’s 20% stake in Jive Records, home of N’Sync and the Backstreet Boys.

But both industry observers and execs within the companies themselves have questioned whether such cuts would gut the merged entity to the point where a deal would no longer be worthwhile.