On the surface, Edgar Bronfman and Eric Nicoli would seem to have little in common.
Bronfman is the starry heir to the Seagram whisky fortune, a former songwriter and Hollywood executive. Nicoli is a former food industry boss who launched the Yorkie and Lion chocolate bars. He tucks his T-shirts into his trousers. But for six years the businesses they run have been locked in a sometimes flat-footed waltz.
Last Monday, Nicoli, chairman of EMI, made a call to the New York offices of Bronfman’s Warner Music group. Two weeks previously The Sunday Times had revealed the two sides were considering a fourth attempt to join the two smallest remaining music companies.A combined entity would add EMI’s Coldplay and the Beatles to Warner’s James Blunt and Madonna. Depending on whose charts you read, EMI/Warner would be the second or third-largest music group in the world.
The meeting at Bronfman’s Rockerfeller Center offices was short and cordial. But next day Warner Music’s board swiftly rejected the cash-and-shares approach worth $28.50 per share.
This weekend EMI was said to be working on a revised proposal. Insiders at Warner were certainly expecting one, even as Bronfman was pouring cold water on the idea. “Consolidation for consolidation’s sake doesn’t make a lot of sense. Ours is not a business that requires scale economics,” he said at a press conference.
But despite his seeming reluctance, a tie-up between the world’s third and fourth music groups is seen by many analysts as inevitable.
“There is compelling logic for them to do a deal,” said Richard Hitchcock, media analyst at Numis. “But now it looks like we are in a stand-off.” Again. Warner and EMI have circled each other for years, with agreements foundering in 2000, 2001 and 2003.
Since then the music market has changed dramatically; sales have slumped and the industry has looked for scapegoats. First was Napster, the online music swap shop that allowed consumers to trade music for free. After Napster’s free centralised service was shut down, file-sharing was blamed.
Now the worst seems to be behind them. Legal sales of digital music are growing. Outside America, EMI is a strong player and its music-publishing arm is the most respected in the industry.
Warner is stronger than EMI in the all-important US recorded-music market. But both groups lag well behind the leaders. According to ratings agency Nielsen Sound Scan, for the week ending April 30 Warner had 18.5% of the US albums market, and EMI had 10.27%. The recently merged Sony/BMG accounted for 26.11% while industry leader Universal had 31.74%.
The two companies may be way behind in terms of market share but their stock prices have been on the rise, buoyed by renewed confidence in the industry and hopes of a merger.
Warner Music was bought out from media giant Time Warner in 2004. Bronfman and a consortium including Bain Capital, Providence Equity Partners and Thomas H Lee Partners paid Time Warner $2.6 billion (£1.4 billion). Floated last May, the company is now worth $3.38 billion, some compensation for Bronfman who was badly burnt by his last media venture.
In the 1990s Bronfman used Seagram’s money to merge the music holdings of MCA and PolyGram Music, creating the world’s biggest record company, Universal. He later sold out to the French conglomerate Vivendi in a deal that proved disastrous both for Bronfman’s reputation and the family fortune.
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