Net Drives Music Merger

With the merger of the music units of Time Warner Inc. and EMI Group PLC comes a plan for the $8 billion joint company to create an industry powerhouse both on- and off-line.

Technology drove the deal, which was announced last week, and "so did fear," said Gary Arlen, president of Arlen Communications Inc., a consulting firm in Bethesda, Md. "No one quite knows which way the music business is going, but they know they have to be online," he added.

Internet users have increasingly bought, sold and traded songs, often without paying royalties. Record companies have resisted the movement to online distribution for fear of losing the profits they make through traditional retail sales.

MP3 Rival

EMI and Warner Music Group have supported the Secure Digital Music Initiative, an effort to create a rival to the MP3 standard that blocks users from hearing music unless they pay appropriate fees.

Warner EMI Music, as the new company will be called, expects to save $400 million per year by 2003 by sharing manufacturing and distribution costs and the cost of investing in new media. Warner EMI is also expected to use its connection to America Online Inc.'s 20 million subscribers.

AOL said Jan. 10 it will acquire Time Warner in a $30 billion deal.

Copyright © 2000 IDG Communications, Inc.

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