AOL Time-Warner Rumored To Be Buying BMG Print E-mail
Wednesday, 14 May 2003

CNN and The Wall Street Journal reported that there are rumors that AOL Time-Warner (WEA) and Bertelsmann (BMG) are in discussions for AOL to buyout BMG. The combination of the two labels would reduce the “big five” down to four. CNN says both sides aren’t commenting what is to be expected in such a large scale deal, if it is in fact going down.

With the music business sucking wind for the last two years, record companies are prime for consolidation and the economies of scale that come with making two big companies into one. AOL is coming off of the worst quarter for ANY company in U.S. economic history (Q4, 2002) but might see an opportunity in buying up BMG to become even bigger in the music business. Other industry scuttlebutt has AOL looking to buy EMI as well as Apple computers looking to buy Universal. It is hard to tell what is going to happen but one thing is for sure – people still listen to music. How they buy it is up for debate but as technology gets more sophisticated there are more unique ways to deliver songs to consumers. And if the product or service is well thought-out – people will pay for it. Apple’s iTunes 4 selling 1 million songs for $0.99 per track in its first week is a perfect example. In terms of the DVD-Audio and SACD format war, the rumored combination of BMG and WEA would give the DVD-Audio camp another strong supporter. BMG says they support DVD-Audio but have released only one disc (in a CD jewel case) on the format. WEA would certainly convert many of the BMG titles into DVD-Audio releases especially if the highly anticipated (but yet to materialize DVD-Audio hybrid) discs become a reality. Record execs inside some of the big five tell AR that the idea of a hybrid disc is what the labels are waiting for before releasing more DVD-Audio titles. With backwards compatibility to CD, the potential market for a physical disc is hundreds of millions not 45 million (AKA: the DVD-Video market).

Sources: CNN, Wall Street Journal

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