Sun, Dec 14, 2003 - Page 11 News List

Sony BMG merger deal signed

BINDING AGREEMENT The merger between Bertelsmann and Sony's music units is one of the largest in the industry, and is another phase in the sector's consolidation

AFP , GUETERSLOH, GERMANY

Germany's Bertelsmann and the Japanese electronics giant Sony have signed a binding agreement to merge their recorded music divisions, Bertelsmann announced Friday.

The deal, one of the biggest in the music industry, marks another phase in the long-awaited consolidation of the sector.

It will bring Sony artists ranging from Michael Jackson, Bruce Springsteen, Celine Dion and Elvis Presley together with Bertelsmann talents such as Avril Lavigne and Britney Spears.

Bertelsmann Music Group (BMG) and Sony Music will be 50-50 partners in the joint venture, which will be based in New York and called Sony BMG, it said in a statement.

Friday's news follows their announcement on Nov. 6 that they had signed a non-binding agreement on the merger.

That announcement enabled them to steal a march on Britain's EMI which had been hoping to acquire Warner Music from Time Warner.

With industry analysts suggesting regulatory authorities would permit only one big merger in the music industry, EMI subsequently withdrew its offer and Time Warner was later snapped up by Canadian tycoon Edgar Bronfman.

Consolidation is seen as a vital step for an industry struggling to come to terms with rampant piracy, especially over the Internet, and falling sales.

Sony Music, the world's number two in the sector with a 14.1 percent share of the market, and BMG, ranked number five with 11.1 percent, had been trying to negotiate a merger agreement since September.

The agreement allows the newly-formed Sony BMG to move closer to the market leader, Universal, which alone accounts for nearly 26 percent.

Universal Music, Sony Music, Warner Music, EMI and BMG together make up 75 percent of the global music market.

The deal does not include the companies' music publishing, distribution and manufacturing arms, nor Sony's recorded music business in Japan, SMEJ.

The transaction also remains subject to conditions including approval from regulatory authorities in the US and the EU.

Chairman of the board at Sony BMG will be Rolf Schmidt-Holtz, currently the chairman and CEO of BMG, while Andrew Lack, the chairman and CEO of Sony Music Entertainment, will be new CEO.

The board will have equal representation from Sony and Bertelsmann.

Schmidt-Holz said the agreement "secures our future and enables us to keep what is most important to us: the creative core."

"Together we will face up to the challenges of the music industry."

Lack said the deal "will give us the opportunity to achieve value for money for consumers worldwide and to respond better to the needs of artists."

Howard Stringer, the chairman and CEO of Sony Corporation, hailed it as "a great step toward the revitalization of the music industry."

He said the partners "respect the different cultural, creative and business particularities of the worldwide music industry."

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