Sony to acquire Bertelsmann's stake in Sony BMG
NEW YORK — Sony is about to become a solo music act after agreeing Tuesday to buy Bertelsmann's 50% stake in Sony BMG, the recorded-music-producer-and-distributor joint venture they created in 2004.
Sony will pay Bertelsmann $600 million and forfeit its claim to half of the $600 million in cash held by the music operation.
The deal, which must be approved by European and U.S. antitrust officials, will end an often contentious partnership at the No. 2 music company after Vivendi's Universal Music. The companies would have had to renew the joint venture in 2009.
Sony says it doesn't plan to change management.
The change comes at a precarious time in music: Sales of CDs and digital-equivalent albums have fallen for years and are down 4.4% this year from the same period in 2007, according to Nielsen SoundScan.
Sony BMG lost $49 million in the quarter that ended in June on revenue of $820 million, compared with a profit of $21 million in the same period last year on revenue of $875 million.
Sony says it can use music from stars including Celine Dion, Alicia Keys, Bruce Springsteen, Justin Timberlake, Usher
and American Idol winners such as Carrie Underwood to help sell TVs, cellphones, and MP3 and video-game players.
"Digital music players and music-related phones are by far the most popular consumer electronics devices in recent years," says Sony Corp. of America CFO Rob Wiesenthal. "And while it will take time to further develop new models and strategies, the music company continues to be a strong cash-generator for Sony."
Sony could save $50 million by consolidating its music unit in Japan with Sony BMG's.
The deal continues a move away from music by Bertelsmann, which owns book publisher Random House, magazine publisher Gruner & Jahr and European TV power RTL Group.
In 2006, Bertelsmann sold its music-publishing business to Vivendi. Bertelsmann is building a licensing and management business. From Sony, it will get European catalog rights to music by about 200 artists. They accounted for less than 1% of Sony BMG's revenue last year, Sony said.
Bertelsmann CEO Hartmut Ostrowski, who took charge in January, also had signaled his intent to exit the joint venture.
"The strategy of Bertelsmann is to focus on organic growth, and music is for us a shrinking business in shrinking markets," says spokesman Andreas Grafemeyer.
Sony to acquire Bertelsmann's stake in Sony BMG - USATODAY.com
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