Universal hots up music merger race

THE major shake-up of the global music industry continues as Universal Music Group, the world's largest record label, said it would buy DreamWorks Records for an estimated $100m (£60m).

At the same time, EMI shareholders have requested further details of talks the company is having with Warner Music in a deal that could be worth more than 10 times that.

The industry is facing a wave of consolidation in the face of falling CD sales, which it blames on illegal file-sharing on the internet. As part of that process, Sony Music last week proposed a merger with Bertelsmann's BMG.

While the terms of the Dream-Works deal have not been made public, it is believed the company would be merged with Universal's Interscope-Geffen-A&M arm, whose stars include U2.

It represents a failure of Dream-Works founders Steven Spielberg, Disney executive Jeffrey Katzenberg and music mogul David Geffen to realise their vision of a groundbreaking cross-media entertainment company combining film, television and music.

DreamWorks' record division, which has stars such as Nelly Furtado and The Isley Brothers, has never really challenged the five major record labels.

The merger, however, is something of a family affair. Dream-Works has long-standing close ties with Universal Music's parent, Vivendi Universal, which date from Spielberg's early hit movie Jaws, made under the Universal banner.

More recently, the two companies came together to co-produce the Oscar-winning movies Gladiator and A Beautiful Mind as well as the box-office hit Shrek. The companies have extended to 2010 an agreement under which Universal distributes DreamWorks films and videos.

Katzenberg welcomed the deal on behalf of his co-founders. He said: 'We have the highest regard for the Universal team and our partnership has been an invaluable part of DreamWorks' success.'

The boards of EMI and Time Warner are expected to meet next week to discuss their deal.