Sony Corp. and Bertelsmann AG said they plan to merge their music units, creating the second-largest record company as piracy and declining demand erode sales in the $31 billion global industry. The companies will each own half of the venture, to be called Sony BMG, Bertelsmann Chief Executive Officer Gunter Thielen said at a press conference in Berlin.
The transaction is expected to close in two months, he said. Rolf Schmidt-Holtz, the 55-year-old chairman of BMG, would be chairman of the company, and Sony Music Chairman Andrew Lack, 56, would be chief executive. Both units are based in New York. Terms of the transaction weren’t disclosed. The combination would add Sony artists such as Bruce Springsteen and Beyonce Knowles to BMG, which distributes music by singers including Britney Spears, to create a company with a quarter of the worldwide market. Record companies in the past three years have been trying to merge as music sales slumped 20 percent to their lowest in more than a decade.
“The industry is going through tremendous difficulties, and mergers are the only way to cut costs,” said Julien Raffelsbauer, an analyst at Bank of America Corp. in London. Sony BMG would have 25.1 percent of the worldwide market, based on figures by International Federation of the Phonographic Industry. The combined group would be second only to Vivendi Universal SA’s music unit. Earnings and revenue at the five largest record businesses have been hit by competition from other entertainment such as video games and by illegal downloading of songs from the Internet. The combination of BMG, currently the fifth-biggest record company, with Sony Music would probably compromise an attempt by EMI Group Plc to buy Time Warner Inc.’s Warner Music, lawyers have said.
Antitrust regulators are unlikely to approve two mergers in the music industry, where the five dominant companies own three quarters of the market, analysts said. “The regulators have it in their hearts to let only one merger to go through, and my feeling is it’s the first to the post that will go through,” said Kingsley Wilson, an analyst at Investec Securities who has a “buy recommendation” on EMI. More: Here
Related Posts
- Update: Sony, Bertelsmann Sign 50-50 Merger Deal
- Universal and Sony plan cut prices for digital music downloads
- Did Apple Offer Sony an ITunes Deal?
- Record labels want a bigger cut of digital music profit
- Sony Exec: Music Industry Is Losing The Battle Against Piracy
Loading ...
