Company Overview
Highlights
One of the Big Four music labels.
Co-owned by Sony and Bertelsmann.
Produced an operating loss for the past two years.
Facing a potential European antitrust ruling that would annul the merger.
The music industry’s struggle with new technologies and changing consumer behavior has spurred the need for cost savings through mergers. In 2004, Sony Music and BMG merged to form Sony BMG Music Entertainment. The joint venture is co-owned by Sony and Bertelsmann and is expected to yield an annual savings of as much as $80 million by combining real estate, legal departments, human resources, and IT systems. About 2,000 employees—a quarter of its staff—were laid off in early 2005. Nevertheless, the company has been unprofitable since its formations.
Sony BMG’s enormous lineup of music labels and big-name entertainers includes Columbia Records (Bob Dylan, Dixie Chicks), Epic Records (Modest Mouse, Jennifer Lopez), RCA Music Group (Christina Aguilera, Dave Matthews Band), and Zomba Label Group, which houses the Jive (Britney Spears, Justin Timberlake) and LaFace (Outkast, Usher, Pink) labels, to name only the most prominent. The cultures of the partnering companies are very different, so managerial friction seems inevitable. Clive Davis, who comes from the BMG side, currently is chairman of the North American division, and despite tension between the Sony and Bertelsmann it is unlikely that he’ll have to worry about erosion of his turf.
Both Sony and Bertelsmann initially held onto the manufacturing and fulfillment arms as well as the music publishing operations that had been part of Sony Music and BMG. However, Bertelsmann in 2006 sold its BMG Music Publishing to Vivendi. The deal, worth $2.2 billion, made Vivendi's Universal Music Publishing Group (part of Universal Music Group) the largest music publisher in the world. In 2008 Sony BMG began selling music downloads in the MP3 format, free of copy-protection safeguards, through its new download service Platinum MusicPass.