NAME

DATE
USAL FACULTAD DE CIENCIAS ECONMICAS
FINAL INGLS IV

Come together
Desperate, music firms are pairing off
A DESPERATION merger in a fading industry, is how Tyler Cowen, an American economist,
describes the plan announced by Sony and Bertelsmann on November 6th to combine their
music businesses in a joint venture. Music executives prefer to talk of synergy, rationalisation
and strength through partnership. But the fact is that big music firms are in deep trouble
because sales are falling fast; merging is one of the few things they can think of doing. Selling
up altogether may appeal even moreas Vivendi, a French conglomerate, until recently hoped to
do with its Universal Music Group, the biggest music firm. Time Warner is expected to announce
soon the sale of all or most of its Warner Music Group.
Time Warner could sell this to Haim Saban, a media entrepreneur, and Edgar Bronfman, a former
owner of Universal Music Group, who both have cash from private equity firms. They are thought
to be primarily interested in the music-publishing part of the business, which is not afflicted to
the same degree as recorded music, but they would buy the entire business if they could get it
cheaply enough. Otherwise Time Warner could choose EMI, a British firm with which it had
planned to combine its music arm in 2000only to be thwarted by the European Commission on
antitrust grounds. For months, Time Warner and EMI have been fashioning a fresh deal in which
EMI would give Warner cash and a minority stake in the merged business.
Music executives wonder whether Sony's and Bertelsmann's announcement, which was about
nothing more than a non-binding letter of intent, was designed simply to spoil things for EMI and
Warner. The top five music companies have 83% of the music market in America, 78% in Europe
and 75% globally, according to Sanford C. Bernstein, a broker. Competition authorities,
particularly the trigger-happy European Commission, may argue that reducing their number
further would hurt consumers, especially since they have been found guilty in the past of
colluding to keep prices high. One merger might sneak through; two will probably not.
The firms will argue that they face new and powerful competitors in the guise of digital pirates
as well as Wal-Mart, which plans to sell music cheaply online. Because of piracy, says one
leading competition lawyer in Washington, DC, she is optimistic that even two mergersboth
Sony/Bertelsmann and Warner/EMIcould be allowed. In the coming months, senior music
executives may spend as much time hyping up the harmful effects of piracy on their business as
they will fighting it.
Mergers would allow music companies to cut their costs further, cushioning their profits against
falling revenues for a while. Analysts think that a merged EMI-Warner would extract $150m300m of cost savings a year. But consolidation will do little to solve their biggest problem, which
is that their customers are deserting them for free-music downloads on the internet, cheap
bootleg copies, and for other forms of entertainment. Combining departments will not help
them, for instance, to get better at finding new artistsa role cornered in recent years by small
independent labels, whose sales are rising as those of big firms fall. At worst, merger deals will
tie up management's time resolving antitrust issues and clashes of corporate culture at a
moment when a much more urgent issue must be addressed: how should the recorded music
industry change in order to survive?
People outside the industry have plenty of answers to this question. Some say it needs to cut CD
prices to compete with the roughly $5 cost of pirate copies; others that it should put far more
resources into building legal alternatives to peer-to-peer file sharingalong the lines of iTunes
and Napster 2.0, but cheaper. Costs are still bloated in the music industry, says Sarah Simon,
media analyst at Morgan Stanley in London, and cost reductions far deeper than those envisaged
in merger scenarios should be made. For now, big music will put its energies into shrinking to as
few players as possible. But soon it will need a new tune.

A. Read the article and answer these questions

1.
2.
3.
4.
5.
6.

Why is merging the best solution for Sony and Bertelsmann?

What objections did The European Commission find to an alliance between Time Warner and EMI?
How can Sonys and Bertelsmanns announcement hurt Warner and EMI?
What kind of competition do music companies face?
What problems wouldnt be solved after consolidation?
What sort of changes could the industry benefit from?

B. Fill in the text with words from the box

SHEETS - CHAIRMAN STOCK - BOARD MEMBERS - TRADED - FINANCIAL DATA - LISTED
SHAREHOLDERS (2) HIGHLIGHTS - AUDITED STATEMENTS - ANNUAL REPORT

WHAT IS AN ANNUAL REPORT

All _______________companies (you can buy _______________ in them) are required by the SEC
(Securities and Exchange Commission) to publish certain _______________ annually. The _______________
is a publication that is distributed by these publicly _______________ companies to their _______________.
Most annual reports are very similar in the different types of information contained. Some of the common
sections are: Letter from the _______________ (or CEO) to the _______________; Financial
_______________; Balance _______________; Profit and Loss _______________; New Business; Year in
Review; Projections; Outstanding Shares of Stock and Complete list of _______________.
Because this information is _________________ and required by the SEC, Annual Reports are an excellent
way to familiarize your self with a company before you invest.
C. Join each pair of sentences using a relative clause
Market segmentation
1. Market segmentation allows you to create a highly focused campaign. This will
directly meet the needs and desires of a specific group.
2. For example, the president of a management training firm had been marketing to
Fortune 500 companies more than a year. One day, she received a call from the
owner of a manufacturing plant. This person needed to have managers trained
3. The president agreed to take the job at the plant. Other training companies didnt bother

to go there, because it was less glamorous than executive offices.

4. The president decided to change the marketing strategy of her company. Its
revenues increased by 80 percent within six months after she targeted only
manufacturing plants
5. Market segmentation is the process of breaking down a larger target market into
smaller segments. They have specific characteristics.
6. Promotional strategies and marketing mixes are different for each group. Its wants
and needs may vary considerably

D. Report this extract from an interview with ITVs spokeman

ITV merger
The two biggest companies in the ITV network, Carlton and Granada, have gained
approval for their proposed merger which they hope will revive their fortunes. But
what difference will the merger make to their business prospects and to viewers?
What will the merger mean for viewers?
_________________________________________________________________________
The merger is intended to free up more money to improve programmes. Granada and Carlton
must produce shows that are watched by a lot of people to get out of their financial situation.
__________________________________________________________________________
__________________________________________________________________________
Why did the two companies want to merge?
___________________________________________________________________________
ITV has been losing market share to other channels, particularly cable and satellite stations.
_________________________________________________________________________
A merger could harness the power of the network, which still garners 50% of all advertising
revenue.
_________________________________________________________________________
And the companies would save at least 50m a year by avoiding duplication.
_________________________________________________________________________
Does it mean the regional ITV companies will disappear?
_________________________________________________________________________
No. Each UK region will still have its individual broadcasters
__________________________________________________________________________
The new company wants to develop strong local and regional news programmes.
__________________________________________________________________________

E. Will or Going to?

Alan: Hi, Brenda. Have you finished the forecast?
Brenda: Not yet. But Ill probably have it ready before 5 p.m. (you/need) ________________ it
today?
Alan: Casey (fly)________________ to head office tomorrow and she wanted to have a look at it
first. She (probably / read) _________________ it on the plane I guess.
Brenda: By the way, we (have) ________________a meeting tomorrow at 10.30 to discuss the new
marketing plan. (you / be) ________________there?
Alan: I dont think so. Mr. Pattien (give ) ________________ a training on the new software. I
dont want to miss it. It (be) ________________very interesting.
Brenda: What a pity you (not / come) ________________! That way it (be) ________________only
Dennis and me.
Alan: You know what? I (go) ________________ as soon as it ends. Perhaps around 11 oclock.
Brenda: Great. I (send) ________________ an e-mail of the forecast to Casey when I finish. See you
tomorrow then

F.

Describe how steel price has changed during the last decade. Use suitable nouns and verbs, with
adjectives or adverbs and expressions such us: to fluctuate / to level off / to reach a peak / to stand at, etc

G. Writing: You have contacted some potential investors to help you set up a business and you have been
asked to write a business plan. Dont forget to include the details of the business, some personal
information, a description of the product or service and of its possible market, what kind of marketing or
advertising you intend to do, the location, premises and the staff required and your objectives.