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BMG-EMI Merger Falls Apart

Bertelsmann’s planned merger with British music giant EMI is expected to be scrapped shortly, highly placed sources close to the action reported yesterday.

Official word of the nixing of a BMG-EMI joint entity will likely come from the congloms in the next couple of weeks. Surprisingly, the companies dropped plans for a merger before a finalized proposition was even formally presented to the EU regulatory board for approval.

In an attempt to make the BMG-EMI deal happen, sources said, Clive Calder and his Zomba/Jive Records were going to play a major role in solving some of the monopolistic concerns raised informally by the European Commission and the Federal Trade Commission.

Amid that backdrop, industry eyes are now focusing on Calder and his Zomba/Jive, which is 20% owned by BMG, and officially ends its U.S. distribution agreement with the German major in June.

To that end, sources said, conversations between Bertelsmann honcho Thomas Middelhoff and Calder are heating up, as Middelhoff sees Calder and/or Zomba/Jive as major players in BMG’s future. Many are pointing to the possibility of a Zomba/Jive sale-with some placing the price tag north of $1 billion, and perhaps a BMG CEO title for Calder.

But other insiders believe that Calder has no interest in selling his massively successful independent. That said, skeptics are watching to see if the label’s NSYNC, Backstreet Boys and Britney Spears can repeat their past sales glory, as all three have albums coming in the future.

A look at U.S. sales by these three acts shows that the first Backstreet Boys album sold 10 million units, “Millennium” sold 12 million and the current “Black & Blue” is at 5 million; NSYNC’s debut sold 8.5 million and “No Strings Attached” has sold 10 million; and Spears’ “Baby One More Time” has sold 10 million, while “OopsÖI Did it Again” has moved 8 million units.

On the EMI front, topper Ken Berry has not been idly sitting around waiting for this merger’s approval, as he did during the proposed Warner Music Group-EMI merger talks. During the ongoing negotiations with BMG, Berry hired manager-producer Andy Slater (Macy Gray, the Wallflowers, Fiona Apple) to top Capitol, and helped sign Mariah Carey to Virgin. In addition, EMI marketshare is way up this year, and with coming releases by Janet Jackson, Aaliyah and Carey, it is expected to continue to grow.

BMG officials had no comment regarding the merger talks, while Bertelsmann, Jive and EMI officials could not be reached for comment.

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