EMI profits slide as Time lags

MUSIC giant EMI revealed today why it is keen to merge with Time Warner's music business in a $1.6bn (£941m) deal as its first-half profits slid again.

But chairman Eric Nicoli said it was 'inappropriate to say more at this time' about the 'firm proposal' he has put to Time Warner.

The Time Warner board is due to decide tomorrow between the EMI cash and shares proposal and a rival bid from former Seagram chief executive Edgar Bronfman Jnr, which is reportedly worth $2.5bn. If it chooses EMI's bid, the world's top five record companies could become three.

Nicoli said EMI had done very well in its first half to keep sales in its recorded music and music publishing divisions stable, with group turnover unchanged at £960m in the six months to end-September.

In recorded music, static sales of £759m looked particularly good against an industry decline in sales of 10.4% over the same period. Headline pre-tax profits, which exclude exceptional items and goodwill amortisation, fell by 7% to £39.4m, but the market was reassured by an unchanged interim dividend of 2p a share.

EMI's share of the recorded music market rose one percentage point to 12.9%, which means if it merges with Warner Music the combined group would have just a shade under 25% of the world market.

That compares with a 25.2% market share for the planned Sony-BMG merger, and 25.9% for Universal, the market leader. Both planned mergers could, however, face stiff regulatory concerns.

Nicoli said: 'While it is too early to predict accurately the industry trends for the second half of the year or our performance within it, we are sharply focused on delivering a solid performance.'

The second half includes new album releases from Janet Jackson, Norah Jones, Renaud, The Beatles, Coldplay, Kylie Minogue, Atomic Kitten and Blue.

But, like the rest of the industry, EMI is suffering hugely from online piracy with measures being taken showing only a small improvement in the main market the United States.