The Flash-based cookies, generated by technology partner Clearspring Technologies, enable data collection and tracking of surfing activity beyond the immediate sites in question.  That opens a broad range of data collection, including detailed demographic and health information.

Even worse, these cookies allegedly have the ability to regenerate upon deletion, a huge privacy override.  Those claims will be tested in court, though numerous references are being made to an earlier case involving Quantcast and a range of major media companies like Hulu, MySpace, and MTV.

Citing multiple unnamed sources, Antony Bruno at Billboard noted that Spotify is “reverting to square one” in its major label talks, and approaching the matter “with a clean slate” to create something workable for the US.

It seems fairly certain at this stage that a European translation of the service into the US is off the table. Warner Music Group is a major roadblock, though others seem to lack the appetite for another freemium free-for-all.

According to the report, Spotify chief Daniel Ek appears willing to launch a modified version – with limitations – while attempting to evolve the service as negotiations continue. Sounds like a recipe for something consumers will hate, but a necessary deal with the devil for Ek

The probe does not involve Warner directly, but does involve WMG chief Edgar Bronfman, Jr. Prior to helming WMG, Bronfman was a vice chairman of the board at Vivendi SA, a company led by then-CEO Jean-Marie Messier. In the early 2000s, the story of that reign is marred by bad acquisitions and tanking valuations.

So many years later, Messier has been panned for unsuccessfully attempting to recast an old-world water utility into a music and television empire. Failure is typically a legal endeavor, though Messier and company are being accused of misappropriation of funds, stock manipulation, and the intentional misguidance of investors.

In that soup, Bronfman has been accused of insider trading in 2002. Bronfman lawyers contend that shares were dumped without knowledge of sensitive company information.

Just recently, EMI owner Terra Firma pitched investors on a 360 million pound ($557 million) rescue plan. That would mostly avoid a painful covenant breach and possible seizure by Citigroup, though Terra chief Guy Hands was also selling some outlandish return prospects. A more immediate injection of 105 million pounds is reportedly ‘close,’ according to one source, though the situation remains on edge.

And what about Warner Music Group? The label has been rumored to be kicking the tires, though during the latest quarterly, WMG chairman Edgar Bronfman mostly avoided the subject. “We really try not to respond to rumors and speculation… in light of the heightened media rumors and speculation regarding EMI, I think it’s prudent for us not to take any comment in that regard.”

So, what is Apple planning, anyway? “It’s yet to be seen what the acquisition of Lala will mean to the iTunes service, I don’t think Apple has made that clear to the market,” Bronfman stated. “So I wouldn’t suggest it will not have an impact, but I certainly won’t speculate what kind of impact it will have.”

Perhaps Bronfman is less interested in sparking a media hubbub this time around. Or, perhaps discussions are really nonexistent. “We made great progress with Apple last year with the introduction of variable pricing, and obviously it’s our hope that we can continue to make progress and continue to advantage content in a digital world,” Bronfman relayed. “But I can’t say there’s a specific initiative today with Apple to – I think we need to digest and the consumer needs to digest this first move to variable pricing, and once that’s happened and is happening, then I think the next set of conversations are due. But that’s not happening today.”

In an early morning pre-release to key media outlets, the label revealed losses of $25 million, or 17 cents a share, from $68 million, or 45 cents a share during the year-ago period. Consensus figures called for a drop of roughly 30-31 cents per share, give or take a few pennies.

Ahead of a complete financial review, top-level stats revealed continued cost-cutting. Sales actually dropped one-percent to $662 million based on continued CD sales drops. But lower costs were achieved operationally and through tax-related reductions. On the digital side, revenue grow 15 percent, a pretty package that remains a bit too small for everyone’s taste.

But, digital now accounts for 30 percent of total global revenue, a result that contains positive and negative elements. On the positive side, the continued digital increase suggests a shift towards newer formats. Closer to reality, the numbers are a bit misleading, because a collapsing physical story naturally boosts the shares of other revenue-generators.

Hits is also showing surprisingly equal year-to-date market shares for both Universal Music Group and Sony Music Entertainment, at 28.7 percent apiece. Warner Music Group is tracking far lower at 14.8 percent, down from 16.1 percent in Q109, also according to Hits.

This is a top-heavy game, and Sony is benefitting from Susan Boyle and Sade blowouts. Warner Music Group is also gaining a substantial chunk of its revenues from bigger releases, as reaffirmed during its latest quarterly earnings call. Next, Nielsen may be weighing in with its own first-quarter tallies, a nice data comparison opportunity.

In the tandem scenario outlined, KKR would acquire the more stable publishing arm, while Warner would acquire the recording division. Both deals could benefit from a seriously-distressed Terra Firma, a firm struggling to complete covenants and reportedly considering a chop-and-sell.

In terms of valuations, the Times pegged EMI Music Publishing at 1.2 billion pounds ($1.82 billion), but stopped short of assigning a price to EMI Music.

Complicating matters is a legal stand-off between Terra Firma and lender Citigroup, one that could cool M&A interest until resolved. Indeed, something always seems to complicate a merger between Warner Music Group and EMI. For years, the labels have been eyeing takeovers of one another, a recurring dance that never seems to reach a resolution

Warner Music Group chairman Edgar Bronfman, a hawk for higher licensing amounts, is undoubtedly less-than-thrilled about this sentiment.  But other gaming publishers are feeling similar top-line pressures, and layoffs at Electronic Arts, Activision, and other studios are reminders of that shift.

Just recently, NPD Group reported a 9 percent drop in US-based gaming sales in 2009 to $20.2 billion.  December offered hope of a rebound, though January numbers quickly doused the optimism – also according to NPD, the sector experienced a 13 percent year-over-year decline last month.

But all of that is rosy compared to the drop in music-related games.  Just last month, Wedbush Securities analyst Michael Pachter counted a 50 percent decline in US-based music-related games in 2009, down from a year-2008 peak of roughly $1.4 billion.  That suggests a separate effect, more attributable to category fatigue than broader recessionary pressures.

After the earnings call Tuesday morning, a deeper numbers dive is revealing a few positive wrinkles.  International recording sales gained 2.5 percent on constant currencies to $498 million, a nice counterweight to a 9.5 percent drop in US-based recording revenues (to $285 million).  Additionally, Atlantic Records finished as the top-ranked label in the US, according to WMG chief Edgar Bronfman, Jr.

The digital component has positive elements, though the broader picture is subject to debate.  Digital sales – at $185 million – now account for 20 percent of broader revenues, though year-over-year gains are slowing.  Specifically, Warner pointed to a 5 percent gain (at constant currencies) compared to the previous quarter in 2009.  But sales were flat when compared to the third quarter, reaffirming theories that a digital plateau has arrived.  On top of that, digital percentages are gaining against a sinking top-line revenue level, instead of boosting the broader total.

Meanwhile, diversification remains a serious challenge.  Warner is clearly suffering from the rapid erosion in CD sales, though other revenue sources are not ramping fast enough. On a revenue total of $918 million, itself rather steady from last year, recordings account for $783 million.  Suddenly, the more stable publishing component – a mere 14.3 percent at $141 million – seems less important, and even publishing is facing its own downward demons.