Sony And BMG Part Ways

by Ted Spangler August 5, 2008, 2:36 pm 3 Comments

 

The joint venture between Sony Music Entertainment and Bertelsmann Music Group, established in August 2004 and scheduled to operate until August 2009, is coming to an early close. There have been speculations of a breakup for the past week, but a filing with the US Securities and Exchange Commission yesterday made it official; Sony will be acquiring Bertelsmann AG’s 50 percent take in Sony BMG.

The joint venture between Sony Music Entertainment and Bertelsmann Music Group, established in August 2004 and scheduled to operate until August 2009, is coming to an early close. There have been speculations of a breakup for the past week, but a filing with the US Securities and Exchange Commission yesterday made it official; Sony will be acquiring Bertelsmann AG’s 50 percent take in Sony BMG.

For its share, Bertelsmann will receive $1.2 billion, with approximately $900 million coming from its 50 percent stake and approximately $300 million coming from its share of cash on the Sony BMG balance sheet.

The new music company will be renamed Sony Music Entertainment Inc (SMEI) and will include, among other labels, Arista Records, Columbia Records, Epic Records, J Records Jive Records, RCA and Zomba. The new SMEI label will feature such artists as Celine Dion, Alicia Keys, Bruce Springsteen, Usher, and Justin Timberlake.

Despite the split, Sony and BMG will continue to share manufacturing and distribution resources, split between Sony DADC and Arvato Digital Services GmbH.

In addressing the deal, both sides concentrated on the positive aspects expected from the new arrangement. Sony Corporation chairman and CEO, Sir Howard Stringer said, “This acquisition will allow us to achieve a deeper and more robust integration between the wide-ranging global assets of the music company and Sony’s products, operating companies and affiliates.” While, Bertelsmann AG chairman and CEO Hartmut Ostrowski noted, “The move is consistent with our new growth strategy and will enable us to focus on our defined growth areas. Sony has been an excellent partner, and they are the right company to take this business to the next step and ensure that it realizes its full value and potential.”

The deal, is scheduled to be completed later in the year, though it still requires regulatory approval from both the US and Europe, which might not be a cakewalk due to Sony’s vertical integration with Ericsson regarding Walkman music-enabled mobile devices.

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