Report: Sony BMG Split Gives Sony More Options
October 14, 2008 at 5:38 AM (PT)
Now that SONY CORP. and BERTELSMANN have broken off their troubled relationship known as SONY BMG, the JAPANESE company hopes to harmonize its consumer electronics and its music, a duo that has been badly out of sync, writes TODAY's L.A. TIMES. The music business combination four years ago made SONY BMG the world's #2 record label, generating savings and preempting other industry consolidation.
But the venture's cost-cutting didn't keep pace with falling CD sales, and the two companies' digital strategies didn't mesh. So they called it quits and SONY bought out its partner for $900 million in a deal that closed OCTOBER 1st.
Full ownership of the music venture, meanwhile, gives SONY control of a medium it can use to drive electronics sales, just as it is using wholly owned SONY PICTURES to help sell the BRAVIA line of TVs. The new company is called SONY MUSIC ENTERTAINMENT INC.
"It's nice to see SONY at least trying to line up some of their content efforts with their hardware," said JUPITER MEDIA VP/Global Strategy MICHAEL GARTENBERG. "Up until now, the left hand never seemed to know what the right hand was doing."
Last year, the entire music market as measured by album and track sales shrank nearly 10%, and it is down about 5.4% so far this year.
All the labels -- including leader UNIVERSAL MUSIC GROUP, SONY, third-place WARNER MUSIC GROUP CORP. AND EMI GROUP -- are making more music available cheaply on a wider array of platforms and devices in the hope that digital downloads will push the needle the other way again. That digital strategy matters more for SONY than for most, since it is close to slipping to #3.