The failure of the Monday talks is a blow to the British group's hopes of participating in long-awaited consolidation in an industry struggling to come to terms with several years of sliding music sales.

The decision could open the way for a takeover of Warner Music by a group of investors led by Bronfman, a former head of the Canadian group Seagram, which at the time controlled Universal Music, analysts said.

EMI chairman Eric Nicoli said in a statement it was no longer possible for EMI and Time Warner to reach an agreement acceptable to both parties. EMI just last week had said the talks were at an advanced stage.

The announcement that the contacts had been broken off followed a weekend meeting of representatives of Time Warner and Bronfman, press reports said.

The offer by the Bronfman-led consortium for all of Warner Music has been estimated at $2.5 billion.

EMI at risk

Some weekend reports in the British press suggested that EMI could fall prey to a takeover itself if it failed to hammer out a deal with Time Warner, with US private equity firm Blackstone named as a possible bidder.

Such speculation provided some support for EMI shares, which gained 1.7% to 165.75 pence in early trading here. The shares had fallen heavily last week on reports that Time Warner was leaning towards the Bronfman-led bid.

With German media giant Bertelsmann and Japanese electronics group Sony having agreed earlier this month to merge their recorded music operations, EMI had been pinning its hopes on a tie-up with Warner Music to try to cut costs.

A deal between EMI and world number one Universal Music is thought unlikely because of regulatory concerns, though analysts note that the Sony-BMG bid could yet founder.

The major music labels control about 75% of the recorded music market and any deal between the big five risks being blocked by competition authorities, as they have been in the past.