Time Warner Takes $1.3B Stake In EMI

Now, you've got music, too.

Time Warner, the pending merger partner of America Online, today said it is spending $1.3 billion to acquire a controlling stake in the music business of EMI Group.

The deal combines Time Warner's existing Warner Music label and its roster of artists that includes Eric Clapton, Madonna and Metallica with EMI, a recording company featuring acts such as the Rolling Stones and the Spice Girls.

With more than $8 billion in sales annually via record labels such as Atlantic, HMV, Virgin and WEA, the combined new entity will control 20 percent of global sales for recorded music. The merged company will rival Seagram's Universal Music for the distinction of being the world's largest music label.

In the process, the merger strengthens the hand of the combined AOL and Time Warner, giving the company an even larger role in charting the way music is ultimately distributed and sold online.

AOL in the past year has beefed up its online music efforts, acquiring music software service Spinner.com. Coupled with an audience of 20 million subscribers for its flagship service alone, AOL offers a significant venue for promoting its music labels. The EMI acquisition simply gives the company more brand-name talent, expanded market share and a deeper library of content that can be re-purposed for online delivery.

Time Warner will have majority control of the 11-member board of the combined company, which will operate as a 50/50 joint venture of the media giants. Time Warner is paying $1.3 billion for the controlling stake in the venture.

The companies said they will cut 3,000 jobs from the merged operations during the next three years. The music labels together now employ more than 23,000 people. The cuts are expected to help the combined company boost earnings by $400 million annually.

Although the music business accounts for 85 percent of EMI's sales in Britain, EMI Group stock will continue to be traded as a separate issue.