Sony, Bertlesmann plan merger to cut losses

MUMBAI: The music industry is in consolidation mode battered and bruised as it is by Internet music sharing, poor retail revenues and competition with other sources of entertainment. Sony Music and BMG have announced their intentions to combine their music units. Another porposed combination involves EMI and Warner Music Group.


Should US and European regulators approve the deal, Bertelsmann and Sony will own an equal stake in the new entity which will become known as Sony BMG. The new company will not include the companies' music publishing, physical distribution and manufacturing businesses. While there is plenty of time to go before any kind of deal is finalised, content wise there is plenty at stake. Sony has Bruce Springsteen, Beyonce Knowles and Celine Dion. Bertelsmann has Christina Aguilera, Alicia Keys, Avril Lavigne and Elvis.

Sony BMG will be the worlds second biggest record label behind Vivendi Universal. The intended deal will affect artists including music groups such as Our Lady Peace, Sloan, The Strokes.

Reports indicate that the deal will cap BMG chief Rolf Schmidt-Holtz's music career. Schmidt-Holtz will remain as chairman of the board of Sony BMG. Therefore he will still have a major voice in the direction of the new company. Sony Music chief Andrew Lack will become CEO and be in charge of day-to-day activities.

This is not the only merger being looked at. Time Warner's Warner Music Group and EMI Group are also discussing a combination of their own. Banks are putting the final touches to a $ one billion funding package to pay for EMI's bid for Warner's recorded music unit. Separately, US media billionaire Haim Saban and former Seagram Chairman Edgar Bronfman Jr are also exploring a bid for Warner Music. Time Warner is said to be conducting discussions with different parties.

While a strategic partnership with another music company would place Time Warner in a better position to compete a Saban-Bronfman-led acquisition would have less hassles with the regulatory authorities. Should the merger go through it would bring Beatles and Frank Sinatra under the same roof with Madonna and Norah Jones. Reports however indicate that the European Union would be cagey about letting both deals go through. Should that happen there would be just three major music labels left.

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