British music giant EMI’s decision to sell its 15% stake in Viva Media AG to AOL Time Warner has effectively put an end to Viacom's chances of taking control of the German TV broadcaster.
For Viva, a takeover by AOL is likely to be the best way to secure its survival.
The move effectively puts an end to any hopes entertained by Viacom Inc, AOL Time Warner's rival, of taking control of Viva. Viacom's channel, MTV, held a virtual monopoly over music television until Viva entered the German market.
Brent Hansen, MTV's Europe chief, more or less conceded defeat in the battle with AOL Time Warner for Viva, speaking of a failure to "fulfill investment criteria and strategic aims".
AOL now owns a stake of 30.6% in Viva, above the level at which a full takeover bid becomes compulsory, under the German takeover code. If it now takes over shares owned by Vivendi Universal, its stake will rise to 49.5%. Vivendi faces a need to reduce its debt burden, so industry insiders believe it's likely to be willing to sell.
For Viva, a takeover by AOL is likely to be the best way to secure its survival. The market for music television is small, and it has been hit particularly hard by the decline in advertising revenue that has been felt across all media. Viva had feared that under the Viacom umbrella, it would simply have been closed down.
Meanwhile, for the recording companies, it is increasingly the case that music TV broadcasters are seen as purely an advertising platform for their products. The music companies produce video clips at high cost, and they then give them up for free for broadcast on channels such as Viva, Onyx and MTV.
Music-industry manager Balthasar Schramm, the new chief of Sony Music Deutschland, has said it's his medium-term goal to dismantle the independence of this kind of "intermediary between the clients and the music companies", to enable the music companies to communicate directly with their clients. Apart from that, the music companies are hoping that there will increasingly be a market for their videos among web companies such as Yahoo, which are willing to pay for content.