More consolidation among major music labels?

Warner Music Group considers selling itself even while it continues to pursue an acquisition of EMI, moves made as music sales continue to fall.

Warner Music Group is reportedly entertaining acquisition offers even as the third-largest record company continues to pursue its own acquisition of troubled rival label EMI.

The New York Times reported that after being approached by buyout firm Kohlberg Kravis Roberts, Warner Music hired Goldman Sachs to seek out buyers. Instead of selling to KKR, Warner's management wanted to see what kind of price it could get on the open market.

Warner Music is home to such artists as Green Day, Faith Hill, and the Red Hot Chili Peppers. According to the Times' story, Warner's private-equity investors want Warner to either place bet big on music by buying EMI, the smallest of the four major labels or "cash out."

Terra Firm, the company that acquired EMI in 2007, could default on its loan from Citigroup and soon be forced to turn over control of EMI. The Internet age has not been kind to the top labels. Overall U.S. music sales shrank last year more than 2 percent while digital sales grew by only 1 percent according to Nielsen SoundScan. Sales have shrunk four consecutive years, and many in the music industry have placed much of the blame on illegal file sharing.

Virgin Mega Store closed its stores in the United States nearly two years ago. Greg Sandoval/CNET

While many skeptics say there isn't credible proof that piracy has contributed to the music industry's woes, there is certainly plenty of anecdotal evidence that the music sector is melting before our eyes.

We could very well see EMI, which produced the Beatles, absorbed by one or more of its competitors. Retail brick-and-mortar music chains, such as Tower Records and Sam Goody have shut down. Wal-Mart Stores has dramatically cut back space dedicated to selling CDs.

Sony announced last week that in March, the company will shut down one of its two remaining CD-manufacturing plants in the United States and lay off 300 workers.

 

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