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Warner Music's Shares Drop on Rival EMI's Profit Warning

Shares in Warner Music Group fell sharply on Wednesday after rival record company EMI Group issued a profit warning on slowing sales in the North American music market.

Warner Music, the world's fourth largest music company, has boosted market share in the U.S., but last week posted a poorer-than-expected 74% drop in quarterly profit as its artists had fewer hit records than the year-ago period.

Warner and EMI, the third largest music company, were locked in merger discussions last year but ended the talks after European officials annulled the merger of Sony Music and BMG Music Entertainment. Sony and Bertelsmann had created the Sony-BMG joint venture in 2004.

Laura Martin, an analyst at Soleil Media Metrics, said continued upheaval at EMI has dampened prospects that a merger with Warner would reap benefits. EMI recently fired its top two music executives and is undergoing restructuring.

"EMI also cited a very weak North American market, Warner is far more vulnerable to North America than EMI," said Martin.

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