Music industry blues fuel merger speculation.

(From Agence France Presse)

As the world's music giants face up to the prospect of another year of sliding sales, rumours have been swirling through the industry once again of a possible merger between two of the big five in the business.

Consolidation among the five largest recorded music groups -- Universal, Sony, EMI, Warner and BMG in descending order -- is seen by many analysts as the next logical step for an industry trimming the fat in response to falling revenues.

"I think it's fairly clear that there have been discussions ongoing between various parties on and off," said SG Securities analyst Anthony de Larrinaga.

"The larger music groups have cut about as much cost as they probably can as they stand, so any further significant cost reduction has to be done through consolidation."

Worldwide sales of recorded music fell by seven percent in value and by eight percent in units in 2002, according to the International Federation of the Phonographic Industry, which represents 1,500 record companies.

Britain's EMI warned last month that the recorded music market was set to shrink again this year, albeit at a slower rate than previously.