BMG-EMI DISSECTED

Traditionally, when it comes to big deals, BMG has been perceived as a "bottom feeder"—never really stepping up to the plate during all the big label acquisitions of the past 10-15 years. It appears Thomas Middelhoff has put an end to that.

Here's how a possible BMG-EMI marriage breaks down: Bertelsmann peels $2 billion to EMI shareholders and folds BMG into EMI, with Bertelsmann taking a controlling interest in the British public company, called EMI-BMG. EMI would divest Virgin and maybe some publishing to satisfying the European Commission.

Obviously, this scenario raises a slew of questions: Did Middelhoff already do his EC homework and get some preliminary nods of approval from Mario Monti & Co.? Was this deal part of his strategy when he aggressively lobbied against the WMG-EMI merger? And where does the EC's alleged fear of a five-to-four industry consolidation play in this? How will UMG react? Will it play spoiler again, and does it have even more EC juice now that it is French-owned? And what about the spurned WMG? Is it still interested in an EMI play? Middelhoff has said that EMI execs could run the new company, but who? More specifically, who would fix the North American problem, where the combined owned-and-operated marketshare of the two companies is 16%?

It's now BMG staffers' turn to experience "merger anxiety" as Capitol, Priority, Virgin, RCA and Arista prepare for possible consolidation. Who will be responsible for that task?

Those questions are amplified when the Ken Berry scenario comes into play. Does Berry join with Richard Branson and Clive Calder to buy Virgin? Where does that leave Jive's relationship with BMG? And what about Rudi Gassner, whose strength lies in the international arena? What will his role be?

Massive action to come…