Sony to acquire Bertelsmann’s 50% stake in Sony BMG

MUMBAI: Sony Corporation will be acquiring Bertelsmann AG’s 50 per cent stake in music company Sony BMG (Bertelsmann Music Group).

With this, the music company will now be renamed Sony Music Entertainment Inc. (SMEI), and will be a wholly owned subsidiary of Sony Corporation of America.

Sony and Bertelsmann AG originally created the Sony BMG joint venture in August 2004.

"Music has been a vital and vibrant part of Sony’s culture for over twenty years. 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. It enables us to offer a total entertainment experience to consumers. Over the past four years, Sony BMG has undertaken a very successful restructuring, streamlined operations and developed innovative digital partnerships that ensure it will continue to be a leader in the creation and distribution of music worldwide. It is an organization rich in talent, ideas and enthusiasm, and is a strong fit with our overall business strategy," said Sony Corporation chairman and CEO Sir Howard Stringer.

"After a careful and thorough review, we made the strategic decision to sell our investment in this joint venture to Sony, a step that we believe will benefit the stakeholders of both our companies. This 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. We look forward to witnessing Sony Music Entertainment’s exciting future under Sony’s ownership," added Bertelsmann AG chairman and CEO Hartmut Ostrowski.

Once the transaction is completed, SMEI will comprise music labels such as: Arista Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Records, and Zomba. Key recording artists will include Celine Dion, Alicia Keys, Yo-Yo Ma, Bruce Springsteen, Justin Timberlake, Usher and Jay Chou.

As part of the transaction, the parties have also agreed to continue to share the company’s manufacturing and distribution requirements between Sony’s manufacturing subsidiary, Sony DADC, and Bertelsmann’s services company, Arvato Digital Services GmbH, by extending the agreements with Arvato for additional terms of up to six years.

As a result of this development, Bertelsmann is gearing the business of its Bertelsmann Music Group (BMG) towards music rights management. Bertelsmann is taking over selected European catalogs of music rights from Sony BMG as part of the transaction. They comprise the works of more than 200 artists. The catalogs will continue to be distributed by Sony Music.

Taking over these catalogs is an important step towards the planned establishment of a licensing and management platform for exploiting and marketing music rights under the BMG brand. BMG will be headed by Hartwig Masuch as managing director. He also advised Bertelsmann in the negotiations with Sony. Maximilian Dressendorfer, Vice President BMG, will also be part of the management team.

Bertelsmann chief financial officer Thomas Rabe, who is responsible for the music division on the group’s executive board said, "The many new distribution paths are causing an increase in the demand for music use rights. In view of this fact, we believe that building a business for the management and exploitation of such rights in Europe is an attractive proposition. We want to take advantage of our opportunities and position ourselves with the strong, well-established BMG brand and a management that is highly regarded in the market."

Masuch added, "I am confident that, by building this new business under the historic BMG brand, we will continue to be successful in shaping the music industry. The activities of Bertelsmann’s various divisions, coupled with the realignment of BMG, provide countless opportunities for us to put together attractive service packages for creatives and rights owners. Our top priority will be to assert the rights owners’ claims efficiently and protect their interests against a backdrop of increasingly complex use and distribution models."