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Tuesday, July 20, 2004

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Entertainment Law

EU OKs Sony-BMG Deal, to Eye Music Sector Closely

By Jeffrey Goldfarb and Jeff Mason

LONDON/BRUSSELS (Reuters) - The European Commission unconditionally approved
a merger between record companies Sony Music and BMG but warned on Tuesday that
it would look closely at any further proposed consolidation in the industry.

The deal creates a rival to market leader Universal Music and shrinks the
number of music majors to four companies from five. Vivendi-owned Universal and
Sony BMG, as the new company is to be called, account for about 46 percent of
music sold worldwide.

"The Commission will keep a close watch on the music sector as it becomes
even more concentrated and would very carefully scrutinize any further major
concentration in the industry," EC officials said in a statement.

Because Sony BMG will become the second company besides Universal Music to
have more than 20 percent market share, industry executives and sector analysts
say the two smaller rivals, EMI Group and Warner Music, might need to merge to
keep up.

Despite the EU's cautionary tone, Bear Stearns analysts said on Tuesday they
thought EMI and Warner could pull off a deal.

"Although EMI/Warner would have a combined market share of 26 percent
globally (up to 30 percent in Europe), we believe these issues could be
addressed through small disposals," the analysts wrote in a note.

courtesy of Reuters

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