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Post-American Record Labels In Trouble: Sony Sees Shortfall

Saturday, January 24th, 2009

BACKGROUND
Sony kind-of bought American culture. A few years back they purchased BMG. Who was BMG? Well, they were an American company that bought-up a bunch of then famous American record labels, like EPIC and Columbia Records.

Way back before all of this merger activity…
the independent labels brought forth some great music. A large portion of what has become known as “classic rock” is included in this music catalog.

Back then, you’d hear the announcer on a live album, such as REO Speedwagon, step up to the microphone and say, “EPIC recording artist, REO Speedwagon….” And, ther crowd would roar. Then, BMG bought a large number of intellectual property rights, including this EPIC recording. Next, BMG got bought by the bigger fish, SONY.

Their record labels include:
Epic
Jive
Columbia
RCA
Arista
LaFace
Zomba Music Group (including Rough Trade and Pinnacle)
SoSo Def
Legacy
J Records
Red Music Distribution

Here is the history according to Wikipedia:

Sony BMG Music Entertainment began as the result of a 50–50 joint venture between Sony Music Entertainment (part of Sony) and Bertelsmann Music Group (part of Bertelsmann) completed on August 5, 2004. It is one of the Big Four music companies, and includes ownership and distribution of recording labels such as Arista Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Victor Records, RCA Records, Legacy Recordings, Sonic Wave America, and others. The merger affected all Sony Music and Bertelsmann Music Group companies worldwide except for Japan, where it was felt that it would reduce competition in that country’s music industry significantly.

Financial analysts covering the merger anticipated that up to 2,000 jobs would be cut as a result, saving Sony BMG approximately $350 million annually.

The company’s Chief Executive Officer (CEO) is Rolf Schmidt-Holtz, who succeeded Andrew Lack on February 10, 2006. In the first half of 2005, the company’s share of new releases in the United States (US) declined from 33% to 26% according to Nielsen SoundScan. This, and Lack’s negotiation of what some called an “ill-conceived” deal with Bruce Springsteen led to Bertelsmann informing Sony that it would not renew Lack’s contract.

The company signed a content deal with the popular video sharing community YouTube.

On August 5, 2008 Sony Corp. agreed to buy Bertelsmann AG’s 50 percent stake in the music company for $1.2 billion to get full control. The music company will be renamed Sony Music Entertainment Inc. and will become a unit of Sony Corporation of America.[1] This will allow Sony the rights to artists on the current and historic BMG roster and would allow Sony Corporation to better integrate its functions with its Playstation 3 and upcoming new media initiatives.

About.com reported:
Sony BMG Music Entertainment, Inc., is one of the so called “Big Four” record companies, along with EMI,
Warner Music Group, and Atlantic Music Groups. Sony BMG, who holds a 25% share of the music market, was born out of the merger of two music industry giants, Sony Music and BMG Music.

FINANCIAL FORECAST
SONY has been bleeding money. This quarter is another example. Their record company is hardly even mentioned in the financial news. If you go to Sony’s Investor Relations, you must dig deep. However, upon digging deeper, they reveal that operating income is expected to be reduced by 11 billion Yen due to lower-than-expected sales and additional restructuring charges in the music business.