Battling declining CD sales, falling profits and pervasive piracy, three of the music industry's five biggest companies are adopting radically different strategies to revive their flagging fortunes.

Two of the companies -- Sony Music Entertainment Inc. and BMG Entertainment -- have chosen merger as shelter from the industry's ills, and they face new hurdles to winning approval from regulators.

A third -- Warner Music Group -- separated from its corporate parent and now attempting life on its own, is cutting jobs, costs and even rock stars with a broad scythe.

All three are finding the transition can be rocky.

On Monday, the European Commission gave Sony and BMG -- owned by German media giant Bertelsmann AG -- 60 pages worth of objections to their proposed union. The document focused mainly on what the commission calls the potential for "passive collusion" by the partners, making it less likely the two would compete over prices once they are part of the same company, according to an industry source with knowledge of the document's contents.

The complaint -- called a "statement of objections" -- marked the first significant snag in closing the deal. But both companies sought to reassure investors and others that such concerns are common in combinations of this magnitude. They noted that about 70 percent of proposed mergers receiving such objections have gone on to approval.

At Warner, meanwhile, executives are struggling not with bringing together but with shedding part of what exists.

In March, the company began firing about 20 percent of its employees. Executive salaries were slashed (then slightly restored) on order of chief executive Edgar Bronfman Jr., who led a partnership in buying Warner from entertainment goliath Time Warner Inc. (then AOL Time Warner Inc.) in November 2003 for $2.6 billion. Departments and labels were combined. Now it's come to the music itself. Earlier this month, Warner began cutting money-losing and under-performing artists from its merged Atlantic-Elektra label's roster, and is preparing to let go as many as half of the label's 170 acts.

All music companies -- large and small -- are wrestling with an industry-wide depression. Music (principally CD) sales have dropped more than 30 percent over the past three years. The industry blames the falloff on illegal Internet file-sharing and bootlegged CDs, though others outside the companies said consumers have been alienated by high CD prices and a rash of uninteresting artists. Sony, for instance, lost $81 million in 2003 after reporting $188 million in operating income for 2001.

Five companies -- Universal Music Group, EMI Group PLC, BMG, Sony and Warner -- sell more than 80 percent of the industry's music. Universal is the largest, capturing about 26 percent of the market so far this year, according to Nielsen SoundScan, which tracks music sales. BMG and Sony are second and fourth, respectively; a merger would make them No. 1, with more than 30 percent of the market. Warner sits in third place, with about 15 percent, and EMI trails all, at about 11 percent.

In November 2003, Sony and BMG announced a joint-venture merger, combining operations to cut costs and make both companies more efficient, arguing that the industry's dire condition makes the union necessary.

Sony has been low on hits recently, though it has a formidable catalogue of former hitmakers, including Michael Jackson, Bruce Springsteen and Aerosmith. BMG, on the other hand, has hit artists such as Usher, whose recent album debuted at No. 1, and Dave Matthews, but a thin back catalogue. The merger would combine the strengths of each company, Sony and BMG executives say.

But that merger must first be blessed by regulators around the world. Neither Sony nor BMG publicly disclosed the contents of the EC's objections and company officials will not comment on the record for fear of annoying regulators. Both companies released statements Monday saying they will address the EC's concerns. The EC said it wants to make a decision by July 14. In the United States, the deal is being scrutinized by the Federal Trade Commission, where the review process is slightly ahead of Europe's, the companies said.

Europe has thwarted music mergers before. To gain EC approval for the AOL-Time Warner merger, Warner backed out of a 2000 merger attempt with EMI after the European body's antitrust chief Mario Monti questioned it. A year later, EMI and BMG bailed on a merger attempt rather than comply with antitrust conditions imposed by the EC.

The EC's concerns this time are similar to those raised four years ago, the source said. Antitrust officials worry that allowing two of the Big Five music companies to combine their recorded music operations (publishing divisions are not included in the proposal as they were in the 2000 bids) would create an opportunity to dominate the market and drive up CD prices.

Another similarity to 2000: Monti still oversees the EC's antitrust division.

Sony and BMG are arguing that the music business is different now than it was four years ago. They say that the market dominance music companies once enjoyed has largely been sapped, not only by online music, but by the rise of big-box retailers, such as Wal-Mart Stores Inc. and Best Buy Co., which control distribution and set prices.

EMI and Apple Inc. -- whose iTunes music store is the Internet's largest digital music retailer, with more than 70 percent of the online market -- both filed objections to the merger with the EC, the source said.

Also objecting to the merger is Impala, a Brussels-based trade group of several independent European music labels.

"Our concerns are that the merger would make it significantly easier for the major companies to abuse the marketplace, dominate retailers and reduce artists rosters," said Impala's secretary general, Helen Smith, in an interview from Brussels. "It would have disastrous consequences across the whole music sector."

One EU concern is that the corporate parents of the two merger partners could stifle competition by using their diverse empires to dominate music distribution and technology. Critics, for instance, point to Sony's new online music service, Sony Connect, which sells digital songs for 99 cents each. Opponents of the deal were concerned Sony might lock out other music companies' artists from the service, but the EC apparently did not see this as a threat, the source said.

Even as they are attempting to merge, Sony and BMG are watching Warner's cuts to see if they will be enough to turn around the rival.

Warner slipped from second to third place in music sales this year, losing nearly 2 percent of its market share, according to SoundScan. The company also is making fewer hit songs. Last year, the company owned 15.4 percent of "current" market share, meaning recently released songs. So far this year, that number has slipped to 13.2 percent, barely above fourth-place Sony in the "current" category.

Warner is involved in a bitter suit with arguably its biggest star -- Madonna -- over Maverick, the label co-owned by Madonna and Warner. The two sides are arguing about the value of Maverick, which either Warner or Maverick is supposed to buy outright at the end of this year. Warner says that Maverick has been unprofitable for the past five years, after scoring hit CDs such as Alanis Morissette's 1995 "Jagged Little Pill," which sold more than 14 million albums.

Madonna herself, who is signed to Warner Bros., has had a poor recent run. She sold only about 640,000 copies of her most recent album, 2003's "American Life," after stringing together two decades' worth of platinum albums.

Michael Thomas Wellington, of Kansas, listens to folk music at Aron's Records in Los Angeles in December. Music sales have dropped more than 30 percent over the past three years.