New music merger?

Sony and BMG might merge, bringing together the world’s second and fifth largest music companies. That would pair Tori Amos and Michael Jackson (Sony) with Outkast (BMG). The resulting firm, supposedly designed to cut common administrative costs, would be almost as large as the industry leader, Universal. Here is the full story.

My take: Regulatory approval is not certain, arguably unlikely, but regulators should not worry about market power issues. This is a desperation merger in a fading industry. The real “industry sector” includes file sharing, once you count that, and the accompanying zero price, the concentration issues do not look so bad. On the other hand, shareholders should not worry if they don’t get regulatory approval. I would expect a mess more than any significant cost savings, as the merger does not address the underlying problems faced by either company.