EU offloads downloads in weighing merger

Firms argue Internet piracy caused decline in sales

BRUSSELS — EU antitrust regulators have rejected Sony and Bertelsmann’s contention that the increase in Internet downloads should be a factor in deciding whether the planned merger of their music divisions can go ahead, sources say.

Firms argue that their deal to create a combined Sony/BMG music venture should be allowed because illegal downloading of recordings has caused a dramatic decline in sales.

Officials examining the case are believed to have rejected this argument, claiming that even if the market has contracted by up to 15% since 2001, it is not shrinking fast enough to influence their decision. Figures gathered by EU executive arm the Commission suggest that the downloading market will not provide a significant revenue stream for the next two to three years.

Doubts persist about the impact of downloading. A recent study carried out by U.S. academics Felix Oberholzer-Gee and Koleman Strumpf appeared to show that the more popular an album becomes as a pirated commodity on file-sharing networks, the more it sells.

The EU suspended its investigation into the Sony/BMG deal last week after requesting more information from the two companies.

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