When Aging Music Companies Merge

• Email
• Share
• Print

It shouldn't have come as much of a surprise when the European Union finally approved the merger between major record label companies Sony (NYSE: SNE) and BMG last night. Sure, there were some competitive concerns, but when you really think about it this is a lot like trying to police prudence in an elephants' graveyard. If the two graying pachyderms want to hook up, just let it be their dying wish and learn to look the other way.

The music industry is changing. While things may not appear so dour these days given Apple's (Nasdaq: AAPL) success in popularizing legal downloads, it's nowhere near as vibrant as it was on the other side of the millennium. The five major labels that once ruled the 1990s -- Sony, BMG, Time Warner (NYSE: TWX), EMI, and Vivendi's (NYSE: V) Universal -- have fallen on hard times in terms of justifying costly recording contracts and bulky infrastructure in a sector that is begging for rail-thin operations.

Piracy seems as though it will be a way of life for the music industry, and while Apple's efforts have been commendable, it's simply serving the role of the honor system when it comes to digital delivery. Less than $100 million into the open guitar case of the music industry won't go far given the annual decline in prerecorded disc sales.

The sector's consolidation has been part of the necessary cleansing process. Now the reinvention process has to kick in. Last summer I wrote about the need for the industry to back off the CD. It is not the appropriate litmus test for gauging artist success, and it's a sorry platform to bank one's livelihood on. The labels need to partner with their musical artists, commanding thinner cuts off the media sales in exchange for wider participation in the more lucrative live shows and merchandising revenue streams. Working together toward the goals that matter in the new century doesn't mean having to learn new songs -- only learning to sing the old ones in a new way.

Sony and BMG will need to get rid of a lot of baggage now, and that's usually painful. Thankfully for them, all elephants have trunks.

So where do you see the music industry going? Are you a musician yourself? What do you play? Care to jam with your fellow Fools? All this and more -- in the Foolish Musicians discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz tasted the industry from the inside once. His band was signed by Sony's Columbia Records. He does not own shares in any of the companies mentioned in this story.