Warner Music Group (WMG) says it will not make another bid for rival music publisher EMI. It may simply be that the industry has become too brutal for Warner to want to risk matching the $4.9 billion offered by private equity firm Terra Firma.
Terra Firma may regret being the winner. Warner has passed EMI is global market share. Universal Music Group and Sony BMG are still the leaders, but WMG has moved into third place at EMI’s share has dropped from 13.6% to 12.8% from 2005 to 2006.
In the first half of the year, CD sales dropped almost 20%. Digital music sales rose 60%, but that part of the industry does not have strong margins and Apple, with 70% of the digital market, controls pricing.
Warner Music’s stock price has dropped by almost 50% over the last year as its earnings continue to disappoint.
It simply does not want to double its pain.
Douglas A. McIntyre can be reached at [email protected].
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