Thursday, August 7, 2008

Sony Buys All of Sony BMG

It’s a less risky business. The advent of the cellphone as a conveyor of music globally takes away a lot of the risk.

-Howard Stringer, chairman of Sony Corporation

In Mark Landler, "Sony and BMG End Their Partnership in Music," New York Times, August 6, 2008

Sony and Bertelsmans recently announced they will disband their four-year-old joint music venture, Sony BMG. Bertelsmann decided that the recording business would continue to tank and that the value it had in the venture would continue to decline, so it sold its stake to Sony for $900 miillion. Sony accepted the gamble of owning the recording company because its executives believe that the purchase of of music through cell phones and Sony's PlayStation Network will bring in stable revenues despite internet piracy. Also building revenues would be increased music sales in huge markets such as China and India, Stringer said.

For its part, Bertlesmann seems to be turning away from consumer media to invest in new service businesses such as education. Last month, the company sold its North American book and record clubs to a private investment firm. Bertelsmann did, however, keep one part of its music legacy: its administration of rights of European musical artists, a business that generates a small amount for such a big company--less than $20 million a year in sales. To Bertelsmann executives, though, artists rights is one area of the music industry with decent prospects, and one that fits with Bertelsmann's growing emphasis on service companies.

--> See chart in article: Share of US music album sales, 2008 -to date

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