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The second profit warning by EMI in two months has stoked the Warner Music Group (WMG) into approaching British music company EMI about a potential bid. Warner has long wanted to merge with the company. There have always been regulatory hurdles that have made the seven-year battle uncertain.

For their part EMI said that at this time there has been no official proposal and there is no certainty that it will come. Warner had actually approached the company on January 24, before the second profit warning was issued.

Experts say that the regulatory mindfield must be explored and felt out to see if things have changed from before. Warner especially feels that with sales and profits down strongly at both companies, the regulatory concerns and climate may have changed.

"The regulatory outlook is still very uncertain," said Numis Securities analyst Richard Hitchcock. "But given how difficult the trading environment is -- U.S. physical sales are down 20 percent in the year to date -- they (Warner Music) will no doubt argue that the case for consolidation has been strengthened."

Warner dropped a huge 74 percent in quarterly profit, and EMI has always had the problem of scaling because it was the smallest of the big four music companies. The deal would increase their music catalog and offer more leverage in cutting costs.

EMI commented that they would take under serious advisement any proposal with "a particular focus on conditionality, the regulatory and operational risk profile, and on valuation in relation to the company's standalone value and the value creation available from a combination."

Other experts said that another side to Warner's approach would be to float a trial balloon to see how much private equity interest there would be in the merger.