Time right for EC but indies voice doubts: market favours majors at EC but Impala ready to fight.(News)

Whatever other obstacles may stand in his way, EMI executive chairman Eric Nicoli could hardly be blessed with more suitable market conditions to justify a major music merger.

Although the latest EMI offer comes three-and-a-half years after it kicked off an era of "merger mania" with its plans to link with AOL Time Warner, the music business world--and more importantly attitudes held about it--has moved on dramatically. The majors are struggling to deliver profits, torn inertial piracy has grown from a standing start to become industry enemy number one and record companies have struggled to entice music buyers to buy through their own digital delivery models.

In addition to the changing environment, last week's EMI offer is also fundamentally different to the deal proposed in 2000. Then vertical integration, delivery systems dominated by the US group AOL, and the dominance of a publishing conglomerate created by the combination of the world's two largest publishers, EMI Music and Warner/Chappell, had Brussels regulators, independent record groups and competitors such as Universal all screaming foul.

This time around, publishing is no longer a factor. It seems clear that once AOL Time Warner has sold its record business it will seek a separate buyer for publishing. In addition, the emergence of alternative delivery systems--albeit mostly illegal ones such as KaZaA and Napster--in the past three years means that yesterday's opponents to a merger are no longer as worried. "Last time, the main objections were publishing considerations and concentration of online power," says one observer. "AOL was potentially a massively powerful influence. But AOL cannot now be considered a scary monster."

Similarly, Stephen Hornsby of legal firm The Simpkins Partnership, which advised Zomba during EMI's last attempt to merge with AOI, Time Warner, believes this new deal needs to be viewed separately from the previous bid. "Because they have taken publishing out of this deal, it might work for the [European Commission] because the recorded music share is less than Universal. The sheer amount of publishing rights held is not so great this time," he says.

Impala has also been quick to make its opposition clear, however. Helen Smith, deputy secretary general of the European indie body, says its position remains the same regardless of partners' identities and that a merger is not a remedy for the crisis in the music industry. "Any merger between the majors will have a seriously detrimental impact on the music market. We will oppose the merger and are confident it will be blocked by the commission," she says. She adds that a June meeting with Lowe and media unit chief Herbert Ungerher has bolstered

Impala's confidence that the indies' view is still a central part of the EC's thinking on the music market.