EMI-WMG TALKS BACK ON?

The London Times quotes an "unnamed senior official" that EMI and Warner Music Group will reopen merger negotiations following word that the European Commission will likely approve the Sony-BMG merger, though both companies insist there is no truth to the report.

The paper said the senior official commented that talks were "inevitable" in the wake of Mario Monti’s decision to approve the Sony-BMG tie-up. EMI and Warner, which held abortive informal merger talks this year, are reportedly "surprised" at the relative ease with which the alliance was approved.

As late as the end of May, EMI Group chief Eric Nicoli denied a new attempt at a tie-up with WMG was in the works. "It’s absolutely not on our radar screen," Nicoli was quoted in the New York Post, insisting, "We’ve demonstrated that we don’t need to do a deal to be a strong business."

But with approval of the Sony-BMG merger reportedly imminent, many see a new EMI-WMG merger attempt as practically a given, since both Sony-BMG and Universal Music Group would dwarf the two remaining groups. Insiders say such a combination has been high on the agenda of Edgar Bronfman Jr., Thomas Lee and partners, since it would give them a way to cash out at least part of their investment.

The chatter comes amidst comments made by recently re-upped EMI Recorded Music Chairman/CEO Alain Levy before a conference of company investors and financial analysts in Europe that digital music could account for 25% of industry-wide sales within three to five years. He wants to make 100% of the company’s music available on a host of new digital channels.

"We aim to offer consumers the ability to purchase our entire music repertoire through all digital platforms where it makes commercial sense," said Levy, who last month received a reportedly lucrative five-year contract extension. Despite continuing threats from piracy and shrinking demand, he is confident new outlets such as ring tones, online stores, cell phone downloads, retail kiosks and video downloads will help to grow the business.

"Imagine a pie where 100% of music consumed was in CD form," explained Levy. "In three to five years' time, we can expect the pie to increase, and 75% of that pie will be music consumed as CDs and 25% will be digital distribution of an album or a single in a digital form."

For the current fiscal year, EMI’s digital sales are expected to be flat at £2.1billion ($3.9b). By comparison, the surprisingly robust ring tone market is valued at £2.1billion all by itself and has already eclipsed singles sales in some markets.