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EMI Chief Avoids Merger Palaver

EMI Group Plc chairman Eric Nicoli didn’t confirm any of the myriad rumors of possible merger plans for his music major at a media confab in Gotham Tuesday, but he didn’t try very hard to dispel them, either.

The British label group – which has been twice spurned by European and U.S. regulators in its attempts to link up with rival majors – would benefit from the expanded scale and geographical reach offered by a combination, Nicoli said at UBS Warburg’s Media Week event.

And the regulatory skepticism, while still significant, may have been diminished somewhat by the dismal performance of the global music market as a whole last year, he said. Worldwide recorded music sales slid by more than 5% in 2001, and are expected to log a similar decline this year.

“The market has definitely changed since anyone tried it,” he said. “And we’ve tried it twice.”

There has been no shortage of speculation about a possible tie-up for EMI, whose market share in the U.S. has been eroding over the past couple of years. The potential suitors mentioned most often are Warner Music and BMG – the very majors whom EMI failed to wed earlier.

Another scenario being floated is a partial merger between the Warner and EMI distribution arms, to cut costs and improve efficiency for both labels. A Warner Music spokesman declined to comment. Separately, Warner announced Tuesday it was relocating its WEA distribution arm to New York from Los Angeles.

Nicoli also provided a frank assessment of EMI’s business for investors at the confab, noting labels need to do more to improve repertoire, add value to their products to compete with other media like DVD and video games, and offer a credible online alternative to peer-to-peer piracy.

But he said EMI has been at the forefront of such changes, being among the first to license its content to online distribution services like Pressplay and MusicNet and renewing its focus on long-term artist development to drive robust future sales.

“Manufactured one-hit wonders have always had a role to play in the industry, but not to the exclusion of artists that have a longer-term potential for success,” he said.

Financially, Nicoli said the dramatic restructuring undertaken by chief exec Alain Levy and vice chairman and North America CEO David Munns over the past year has begun to pay dividends. EMI is on track to deliver previously predicted cost savings of $120 million for the current fiscal year, and has restructured its debt loads so that 95% of outstanding loans won’t mature for at least two years.

Nicoli said investor pessimism about the fate of the music market and the threat of online piracy has all but overshadowed his company’s improvements. He noted EMI Music Publishing, valued at a conservative nine times its net publisher’s share, constitutes more than two-thirds of EMI’s overall market capitalization.

EMI’s London-listed shares were trading flat at 152 pence ($2.40) Tuesday.

Separately, EMI tapped Zomba Music veteran Ivan Gavin as operating chief for North America, reporting to Munns.

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