(Reuters) (01/27/04)

By Bernhard Warner

Edited By Michael Bennett

CANNES, FRANCE - A contingent of independent music labels has vowed to fight the proposed merger between music giants SONY MUSIC and Bertelsmann's BMG as a crucial deadline for approval by European regulators looms.

Trade group IMPALA, which represents 2,000 independent European music labels and such artists as The White Stripes and Carla Bruni, said it would take its objections to the European Union this week in an effort to block the merger.

"Our main point is access. We want to avoid a situation where a combined entity makes it impossible for smaller independent labels and artists to get access to broadcasters and retailers," said Philippe Kern, secretary general for IMPALA.

Opponents of the deal have until Wednesday to file Article 11 letters with the EU, Kern told Reuters on the sidelines of the Midem Music conference in the French Riviera resort of Cannes.

The EU's Competition Commission is expected to announce on February 12th whether the proposed union will go through or requires additional scrutiny, Kern said. The independents are not alone.

Industry sources attending the annual music confab said Sony's and BMG's biggest rivals, including EMI and Universal Music, oppose the merger on similar grounds.

Spokespeople for EMI and Universal declined to comment on Monday.

A combined Sony-BMG would be the world's largest music label, commanding 25 percent of the $30 billion global market.

It still requires regulatory approval in the United States and EU.

Opponents fear Sony-BMG artists, which would include top-selling acts including Beyonce Knowles, Justin Timberlake and Elvis, would get considerably more media exposure, particularly through Bertelsmann's interests in RTL television and radio stations.

Bertelsmann has a 90 percent stake in RTL Group.

The concern has grown in recent weeks with the continued success of the "Pop Idol" talent spotting TV series format, an RTL creation.

BMG has signed recording deals with many of the winners.

In 2001, IMPALA played a major role in the EU's rejection of the proposed merger between EMI and Warner Music.

The group will again argue that consolidation among the five major labels would squeeze out the independent labels and threaten the careers of aspiring artists.

Industry observers believe Brussels will look more favorably on a tie-up this time, with the industry in the grips of a piracy problem that continues to eat into CD sales.

At a press conference on Monday morning, the trade body IFPI's Chairman Jay Berman said he thought sales could rise by three to five percent in 2005.

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