Tuesday, August 5, 2008

Bertlesmann bows out of Sony BMG for $1.2 billion

The German publisher has sold its 50 percent stake in the joint music publishing venture, although it plans to retain the catalog rights to certain acts within Europe.

Under Sony management, the Sony BMG publishing group will change its name to Sony Music Entertainment Inc. (SMEI), and would become a wholly-owned subsidiary of Sony. The Japan-based company will continue to use Bertlesmann-owned Arvato Digital Services for up to six years for its distribution needs, it said this morning.

Tuesday's deal culminates a month of speculation over Bertlesmann's future with the joint venture -- one that was set to expire in August 2009. The music publisher is also coming off a lackluster quarter, with sales down six percent year-over-year.

"Music has been a vital and vibrant part of Sony's culture for over twenty years," Sony 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."

With the Sony BMG catalog completely under its control, Sony would have an impressive stake in the industry, as it also controls Arista, Columbia, Epic, J Records, Jive, and RCA Records among others.

Bertlesmann is not getting out of the music rights business, however. It will retain the rights to about 200 artists in Europe, which would fall under the BMG brand. Their music will still be distributed under the Sony Music banner, however.

"The many new distribution paths are causing an increase in the demand for music use rights," the company's financial chief Thomas Rabe said. "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."

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