Time Warner makes music with EMI

Time Warner will today announce plans to marry its music division with UK-based EMI Records, just two weeks after agreeing a $145 billion merger with America Online.

The deal will create the world's biggest record company and will allow EMIto cut the cost of CDs by pooling manufacturing costs. With AOL in the fold it could also accelerate the trend for downloading music from the Internet. Both Warner and EMI have been testing ways for consumers to download music digitally through PCs and portable gadgets.

The giant record company, which will bring together artists such as the Rolling Stones, Robbie Williams, Cher and Madonna, will have access to America Online's captive audience of 20 million subscribers.

Last year EMI said it expected to make about 10 per cent of its sales through the Net in the next five years.

In a statement issued at the weekend, EMI said this is an "opportunity toestablish the world's premier music group and to create considerable valuefor shareholders of both companies".

The merger comes at a crucial time for Warner and EMI. Warner Music's earnings fell from $288 million in the first nine months of 1998 to $279 million for the same period in 1999. EMI has been recovering from its own difficulties, but in the six months ending in September last year, the record company's profit was up by 61 per cent to $108 million compared with the same period in 1998.

Warner and EMI aim to cut $400 million in costs over the next three years by linking their operations, said a source close to the deal.