Business Matters is a daily column that offers insight, analysis and opinion on the day's news.

-- With the news that Citi has refused to restructure EMI's debt to the liking of Terra Firma comes a new round of merger speculation. Pali Research's Rich Greenfield believes Citi will push to break up EMI and sell the recorded music division to Warner Music Group. Why not acquire the entire company?, asked MediaMemo's Peter Kafka. For starters, there could be regulatory impediments to prevent WMG from acquiring EMI in its entirety. While the industry can say mergers will help it survive this painful digital transition, the concepts of larger corporations and concentrated market shares were more popular earlier in the decade. In 2006, Universal Music Group had to sell off some publishing assets after it acquired BMG Music Publishing. Citi is likely to find greater value in EMI Publishing, which is a relatively safe investment with predictable, recurring revenues.

WMG restructured its debt earlier this year, but the big question is how much of EMI's debt it would be able to assume. EMI currently sits on 2.5 billion pounds ($4.2 billion) of Citi debt. WMG's long-term debt as of June 30 was $1.94 billion. In the previous nine months it had generated $2.32 billion in revenue and $405 million in after-tax cash flow before paying interest expense of $109 million. Interest on $4.2 billion, the amount of EMI's current debt, is far greater than WMG's current cost of servicing its debt and would limit maneuverability. Of course, there would be cash-saving aspects to a merger that would help service the additional debt. There would be significant cost savings through the elimination of redundancies - especially on the recorded music side. This is all speculation, of course. Merger talks have persisted for years, and in more favorable financial climates. (MediaMemo)

-- The New York Post looked at EMI's financial woes in the context of attracting new artists - a topic that has been discussed since day one of Terra Firma's ownership of the music company. One source said, "They have no leverage with artists because they aren't investing in artists and repertoire, they have no management to develop artists, and [Guy and Elio] have no relationships in the music community to build off of." But the Post named some of EMI's new acts - who have yet to break big - like Hockey and the Postelles. And it mentioned three established acts to sign new deals with EMI: Alice in Chains, Snoop Dogg and Depeche Mode. (NY Post)

-- Guvera is the latest in a long line of ad-supported music sites. Expected to soon announce a deal with Universal Music Group, Guvera is an Australian start-up launched by a former advertising executive. The LA Times' Jon Healey thinks the site might work because of the way it links brands with users. The site, Healey wrote, is set to launch in the U.S. by the end of the year. Here's how it works: "When users register, they're asked for the usual personal details (location, age, gender), as well as for insights about their tastes (their favorite music, movies, sports, holidays, countries, that sort of thing). They then enter the name of a band, song or genre to search for, and Guvera returns a list of advertiser-sponsored channels that provide the matching tracks. Once they pick a channel, they can stream or download other music paid for by that brand." (LA Times Technology blog)

-- Eric Garland, CEO of BigChampagne, wrote a blog post at NPR's Monitor Mix that answered the question: "Did Radiohead's "In Rainbows" experiment work?" Actually, he doesn't answer the question as much explain how two-year-old criticism seems antiquated with the current state of digital music. "On what's essentially the two-year anniversary of In Rainbows' release, I'm struck by how safe it all seems now. Releasing a pay-what-you-wish album now is almost yawn-worthy. Major artists are experimenting with price points, novel distribution models and giveaways at a dizzying pace. But we aren't any closer to knowing what works or what will become a consistent model for the future...In 2007, letting fans choose was "the most audacious experiment in years." Two years later, it's almost quaint." (Monitor Mix)

-- As a part of a crackdown on the use of endangered wood, Gibson Guitars' manufacturing plant in Nashville was searched by U.S. Fish & Wildlife Service agents on Tuesday. Gibson said it is cooperating with the agents and it did nothing wrong. (The Tennessean)

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