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Wednesday, 2 February, 2000, 18:19 GMT
Who'll take Bertelsmann to the top?

Whitney Houston Whitney Houston: signed to Bertelsmann's Arista label

German media giant Bertelsmann has denied reports that it is in talks to create a partnership with Sony.

There has been growing speculation that the company is planning a link-up to boost its current status as the world's No 4 music group.

MP3 There's speculation Bertelsmann could look to the internet and MP3 technology
Reports in the Financial Times and the Wall Street Journal suggest that Bertelsmann is looking at various options. Another name being mentioned is Seagram Universal, owners of Polygram.

Bertelsmann denied that it was in any concrete talks on Wednesday, but reiterated its goal to be the world's biggest music operation by the end of the year.

Chief executive Thomas Middelhoff said last month that that was his priority. Since then, however, the tie-up between Time Warner and EMI has moved the goalposts.

But observers believe Bertelsmann's desire to spread its wings remains undiminished. Reports say the company could be interested in a partnership with Sony and is also considering various ventures for internet music distribution.

Cost-cutting cooperation

A full merger with Sony looks unlikely, as that would give the resulting company 30% of the music market, which is likely to cause raised eyebrows among the regulators.

But there are other ways for companies to cooperate and cut costs, such as sharing CD manufacturing and distribution.

"The only place the music industry competes is in signing and promoting acts," said Paul Richards, a music industry analyst with WestLB Panmure in London. "Everything else is open.

"After the Time Warner-EMI merger, the obvious question facing Bertelsmann and everybody else is how to respond to the competitive threat."

But to achieve its goal of being No 1 by the end of the year, Bertelsmann would have to cooperate with one of the other big four companies, Richards believes.

With Time Warner and EMI already engaged, and Universal having too big a market share, that leaves Sony as the most suitable suitor. But there are suggestions that Bertelsmann might be taking a more lateral view.

It already has more than 200 labels including Arista, RCA and Ariola, but the music industry has shown little growth in recent years.

Analysts think mergers and deals on the internet might be a better means of boosting distribution. Two names put forward have been and Liquid Audio's

Whatever road Bertelsmann chooses, it says there is no hurry - it is certain it will get there by its self-imposed deadline.

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See also:
24 Jan 00 |  Business
Merger heralds music scramble
23 Nov 98 |  The Company File
Music giants fail to cut record deal
19 Jan 99 |  The Company File
Facing the music

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