Bertelsmann, Sony Corp. plan to merge their music companies

Thursday, November 6th 2003, 12:00 am
By: News On 6

FRANKFURT, Germany (AP) _ Bertelsmann AG and Sony Corp. plan to merge their music businesses, Bertelsmann announced Thursday.

A merger of Sony Music Entertainment and Bertelsmann's BMG would bring together the world's No. 2 and No. 5 music companies as the industry struggles with losses blamed on music piracy. The world's No. 1 music company currently is Universal Music Group, a part of Vivendi Universal SA.

Bertelsmann didn't say whether the two companies had agreed on financial terms in their letter of intent or what issues remained to be worked out before a final agreement could be struck.

The deal, if it goes through, would combine Sony and BMG's recorded music business but would exclude music publishing, physical distribution and manufacturing. The new company, to be called Sony BMG, will be owned equally by Bertelsmann and Sony.

Rolf Schmidt-Holtz, currently chairman and chief executive of BMG, will serve as chairman of the board of the new joint venture. Andrew Lack, chairman and chief executive of Sony Music Entertainment, will be chief executive.

The board of the new company would be split, with an equal number of directors from each partner, and senior executives from both groups would join the venture.

An agreement would be subject to approval by regulatory authorities in the United States and Europe.

The deal would put some of music's biggest stars under a common corporate roof. Sony Music Entertainment's labels include Columbia, Epic, and Sony Classical, and it is home to pop artists including Bruce Springsteen, Beyonce Knowles and Celine Dion.

Among the stars on BMG's various labels are the Dave Mathews Band, Christina Aguilera, Alicia Keys, Avril Lavigne and the late Elvis Presley.

Other major record companies also are seeking to merge as a way to shore up their strength. EMI Group PLC of Britain is in talks about the possibility of buying Warner Music Group from Time Warner Inc., three years after European regulatory opposition ended their discussions about a possible joint venture.