Monday, August 11, 2008

Sony buys out Bertelsmann’s music share   Sony announced that it has come terms with German media company Bertelsmann to buy out that company’s share of the world’s #2 music recording company, Sony BMG.  The deal, for Bertelsmann’s 50% holding in the company, is for $1.2 billion. The new company will be called Sony Music Entertainment. Bertelsmann will hold on to small European music holdings.   The two companies merged their music divisions foiur years ago, reducing the number of major music recording companies to four from five.  Since then, the industry has continue to sink, thanks to new music consumption patterns as well as piracy. Apparently, the combined company has never clicked culturally, and there has been enormous turnover over the past few years.   The perceived value for Sony is in its increased ability to offer joint products that include music downloads and hardware, as well as entertainment software. The idea is that company could license an artist’s songs,  offer them as loss leaders or package deals  for iPod/iTunes competitors and electronic phones, and use them in Sony movies and TV programs.   Ah! the deam of synergy!    A nice idea, but as an article in Variety ("Sony, Bertelsmann agree BMG buyout", 6/8/2008) points out: Connecting the different product lines has been a tough sell, however. Sony has struggled, and often flopped, in its attempts to offer consumer products related to its music; the most notable examples are the mini-disc, its online retail operation, the SACD and a recent gift card collection with codes for downloads. The price reflects it all. In 2003, competitor Warner Music was sold by Time Warner  to Edgar Bronfman and an investment group for $2.3 billion. Now the old BMG, which was a bigger company than Wraner Music, is valued at half that amount. 12:35:39 PM

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