It's the end of CDs as we know it (cos I'm online)

The $12bn merger between rival music giants Time Warner and EMI has ruffled a few feathers in the music industry. But following hot on the heels of Time Warner's deal with AOL, how will it affect the fledgling digital music market? Sally Watson hears what's on the grapevine

EMI and Time Warner are two companies with considerable retail influence. There can be few people on the planet who haven't heard music from at least one of their artistes - names which include The Beatles, Madonna, George Michael, The Spice Girls and The Everly Brothers. And the reason for the merger? The Internet. Well, at least in part. At the announcement, Eric Nicoli, co-chairman of the newly-named Warner EMI Music, said: "The timing of this agreement could not be better as our industry embraces the digital revolution. "It enhances our ability to realise the opportunities presented by the Internet and other new media, and it will allow us to deliver all of our main strategic objectives in a dramatically shorter timeframe." A commendable sentiment, but how much influence will the new Warner EMI Music have on technology development? Not a lot if Peter Kumik, business development director at copyright software specialist BreakerTech, is to be believed: "Their influence will be an economic one. In terms of industry standards they won't be that strong. "The music industry has been very successful [in the past] at dictating to users what format to use - but it's unlikely they're going to be able to do it for much longer. Consumers will drive a lot of this," he said. Ray Nash, media spokesman at Cap Gemini, agreed: "There's almost an innocence about the music industry. I don't think they realise how quickly technology is going to change things. "There's no reason for new players, like MP3 providers, to change direction. It's the record industry that's got to do something innovative. That's why the AOL/Warner/EMI merger is so important." But Andrew Farrow, head of commercial development at Magex, thinks the music distributors have been largely underestimated. "There's been a lot of criticism, but large organisations take time to change. The major record companies have been a lot more active than they've been given credit for." And will they help the development of online music? "Initially they'll try and impose standards," admitted Farrow. "The marketplace is in for a period of confusion - which invariably happens in any new area." So are we likely to see a new breed of online music giants muscling in and imposing their plans on the development of digital music? Cap Gemini's Nash pictures a split-level industry: "We're going to end up with a handful of major, global companies at the top, and a second level of smaller, local players," he said. Farrow isn't so sure: "I don't think we're likely to see much more consolidation in the music market. What we will see is lots more major partnerships like the Universal Music/RealNetworks deal. "I don't think the music companies have lost sight of the fact they are selling music not hardware," he added. BreakerTech's Kumik agreed: "These big organisations have many diverse businesses, so they can support many different standards over a period of time. It's not like the Betamax/VHS video argument - the software world doesn't work like that, you can download and use different formats at the same time." So what will drive development? "The industry will be driven by content," said Kumik. "That's what's valuable."