Time Warner Sacrifices EMI For the Good of the Deal

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Sacrificing a bid to become the world's largest music company in order to be part of the world's largest media concern, Time Warner (corporate parent of this publication) said goodbye to EMI and hello to AOL.

It was all for European Union trustbuster Mario Monti and the European regulators, who were choking on the idea of an American company whittling the Big Five down to four and then dominating the budding online music scene, as an EMI-Time Warner-AOL combination might well have done. The message that mattered: Drop the Beatles, and you can have Steve Case.

Oh, the music men tried -- EMI offered to drop moneymaker Virgin Records to grease the skids, and company men involved in the intense negotiations insist they'll be back for another try when they've learned their lessons. But when regulators continued to balk, the mammoth $183 billion AOL deal had to come first.

Now it's coming soon. Time Warner and AOL have given the Europeans assurances that they would not discriminate against rival Internet Service Providers for five years, and AOL is terminating a music-distribution partnership with Big Fiver Bertelsmann by buying the 50 percent it doesn't own. Monti is apparently satisfied, and EU approval of the deal could be settled on internally by the EU as soon as Friday and announced by the European Commission -- the EU's executive branch -- no later than October 24.

Monti's counterparts in Washington, of course, have a largely different set of concerns, centering on whether the new cable-Internet-media behemoth will work and play well with its rivals after it gains control of so much of the broadband business' railroad tracks. But with investors mostly rooting for the deal -- or at least for the waiting for it to get signed so they can cash in on the premium on TW's shares -- the companies have been plenty willing to play ball, and Europe's approval was always deemed the harder won.

EMI was an attractive prize, a good continental complement for Time Warner Music with a stable full of big names. But apparently it wasn't worth calling off a marriage over.