Warner Buys EMI, Makes AOL Look Smarter

SAN FRANCISCO (01/26/2000) - Friday's news that old media (the recording industry) and new media (MP3.com) are still waging war over who will control online distribution seemed so ... 1999. At least, it seemed that way in light of Monday's news that new media (America Online) would solve the problem by simply swallowing old media - not only Time Warner, but also EMI's music group.

A day before the deal was announced, the Sunday press was all over the news that Time Warner planned to spend about $1 billion to take over EMI, reducing the number of top players in the recording industry from five to four.

AOL took a low profile in most stories, but few reports failed to mention the obvious: The deal "boosts the rationale" of the AOL-Time Warner deal, as the Wall Street Journal's Charles Goldsmith and Martin Peers put it. The Los Angeles Times' Chuck Philips called music "the most immediately valuable entertainment asset on the Internet." He also reported that AOL execs, including Steve Case, "were informed as the EMI discussions progressed, and enthusiastically endorsed the possibility of gaining access to an even wider library of music for online exploitation."

Media outlets on EMI's home turf of London were much more skeptical. The Times of London wrote that the deal was "likely to meet fierce criticism from the City," where the "merger is likely to result in thousands of job losses." And according to the Financial Times, the proposed union is hardly a done deal. The pink paper reported that "[l]eading media companies were last night considering whether to try to thwart the proposed merger" and named Bertelsmann, Sony Music and News Corp. as among those "understood to be considering their response."

Reuters' Scott Hillis won the Net journo booster award by predicting the deal would "certainly hasten the arrival of the day when music fans will be able to have songs ... piped to their PCs with the click of a mouse." To back this up, he quoted Launch Media's top exec David Goldberg, who gave credit to EMI for working with online distributors to figure out tough issues like copyright protection. He also found an IDC analyst, Kevin Hause, who said - with understatement - that the deal "could put AOL in the driver's seat for determining the future of online music distribution."

See how it is, MP3.com? If you want to play hit tunes, just shell out a measly billion or so for a record company, and everybody's happy.

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