Wednesday, June 11, 2008

Bertelsmann AG wants to sale its share of Sony BMG Music Entertainment to Sony

Bertelsmann AG, one of Europe’s biggest media companies is going to sell its share of Sony BMG Music Entertainment to Sony. Though the two parties have not disclosed any information but from various news sources it has been confirmed that Bertelsmann is going to sell its share of world’s second largest music label. Bertelsmann is asking for $1.5 billion but Sony would settle for $1.2 billion- $1.3 billion under the fulfillment of certain conditions which might include extension of Sony BMG’s agreement with arvato AG to supply production, packaging and distribution services for Sony BMG. Bertelsmann’s CFO, Thomas Rabe, held two meetings with Sony America’s finance boss Robert Wiesenthal in New York last month. The Hollywood Reporter reports:

Sony and Bertelsmann's current agreement runs out August 2009 but sources believe a deal is likely by this fall and could even come before Bertelsmann's half year results are announced August 28. A Bertelsmann spokesman Wednesday told THR "no decision had been made" regarding the Sony BMG stake and declined to comment on what he termed "market rumors."

Bertelsmann CEO Hartmut Ostrowski has made it clear a BMG sale option is on the table as he moves to focus on the German media giant on its high-growth core businesses.

Currently Sony BMG is the second largest music company in the world with artists including Sean Kingston, Avril Lavigne, Neil Diamond, and Alicia Keys.

Sony and Bertelsmann started this joint venture in 2004 and according to their contract, it was supposed to continue till 2009. News of Bertelsmaan’s exit first came on The New York Times a week ago followed by a report in German newspaper, Frankfurter Allgemeine Zeitung (FAZ), on 10th June. Today, German broadcaster, Deutsche Welle, confirmed the news. The main reason behind Bertelsmaan’s exit was low profit margin as CD sales fell down. In September 2006, Bertelsmaan sold its BMG Music Publishing business to Vivendi.

Related articles:
The Hollywood Reporter


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