Bertelsmann wants to conquer music world

Details of the proposed pairing remain sketchy. EMI and BMG confirm that high-level talks have taken place but maintain that an outright acquisition is not in the offing. BMG officials were not immediately available to comment.

A partnership with EMI makes sense, especially in light of Bertelsmann's groundbreaking deal with Napster, which BMG and the other major labels are suing for copyright infringement. The deal calls for the creation of a for-pay, secure file-swapping service, and for BMG's new power centre, the e-commerce group BeCG, to loan an undisclosed amount to Napster.

Without the participation of other major recording groups, the new, Bertelsmann-sponsored Napster would have little appeal. After all, how many listeners would flock to a service offering music from just one of the Big Five record companies -- not to mention all the independent labels that have yet to strike a deal with the company?

Fans, furthermore, are loyal to artists, not labels. The two companies' talent rosters would fit together nicely. BMG has popular acts such as Dave Matthews, Toni Braxton and teen idol Christina Aguilera, all of which appeal to a younger audience. While EMI has some similar artists, it also has the catalogue for classic rock groups such as the Beatles and the Rolling Stones. EMI also owns the highly regarded Blue Note jazz imprint, which appeals to a smaller but more affluent audience.

Bertelsmann's newly aggressive approach to its music business already has riled its own executives. BMG Chairman Michael Dornemann and President Strauss Zelnick resigned from the music powerhouse early last week, just days after the Napster announcement. Meanwhile, a planned restructuring of BMG will strip the division of its distribution responsibilities.

Friday's news comes after weeks of speculation that Bertelsmann, which is trying to surpass the Universal Music Group as the world's largest music company, would make an out-and-out bid for EMI. A full-out merger, however, is unlikely given that regulatory authorities in Europe already have denied a proposed Time Warner-EMI union.

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