Sony BMG

Sony BMG Music Entertainment

Former type	Joint venture
Industry	Music & Entertainment
Fate	Sony buys Bertelsmann's share
Successor	Sony Music Entertainment
Founded	March 3, 2004
Defunct	October 1, 2008
Headquarters	New York City, New York, USA
Key people	David Gordon: Chairman Sound & Vision
Products	Music & Entertainment
Parent	Bertelsmann AG (50%) Sony Corporation of America (50%)
Website	sonybmg.com

Sony BMG Music Entertainment was a recorded music company, which was a 50–50 joint venture between the Sony Corporation of America and Bertelsmann AG. The venture’s successor, the again-active Sony Music Entertainment, is 100% owned by the Sony Corporation of America.

History

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 March 4, 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.

The merger

On March 27, 2006, the New York Times reported that Bertelsmann was in talks with Sony to possibly alter the current venture. Two executives close to Sony BMG said that Bertelsmann may offer Sony its half of the company in order to raise money by leveraging some of its media assets. Executives close to the label have stressed that any such agreement will likely take months to conclude.

On July 13, 2006, however, the European Court of First Instance annulled the European Commission's clearance decision as IMPALA (a trade association for independent labels in Europe) had applied for. This judgment was appealed by the merging parties. On October 3, 2007, after a new investigation, the European Commission upheld its prior approval of the merger.[2] ^[2]

It was also announced in 2006 that Sony BMG would dismantle the Sony Urban Music label. All of the artists will now be assigned to Epic or Columbia.[3]

It was announced in March 2007 that Sony Music Entertainment Japan, which is not part of Sony BMG, would dismantle the Tofu Records label. All of the SMEJ artists will be now signed to Epic or Columbia.

The international media and entertainment companies Sony Corporation and Bertelsmann AG announced on August 5, 2008, that Sony has agreed to acquire Bertelsmann's 50% stake in Sony BMG. The music company, to be called Sony Music Entertainment Inc. (SME), will become a wholly owned subsidiary of Sony Corporation of America.

On October 1, 2008, Sony Corporation completed the acquisition of Bertelsmann's 50% stake in the companies' joint venture.^[3] The music company is now a wholly owned subsidiary of Sony Corporation of America and operates music labels such as Arista Records, Upstate Records, Columbia Records, Epic Records, J Records, Jive Records, RCA Records and Zomba Records. The sale price was not disclosed when the deal was announced in August, but news reports valued it at $1.5 billion.

Controversies

2005

July

Sony BMG was fined 10 million dollars after the New York Attorney General's office determined that they had been practicing payola mostly in the form of direct payments to radio stations and bribes to disc jockeys to promote various artists including Franz Ferdinand, Audioslave, and mainly Jessica Simpson.

Epic Records, one of their labels, was specifically cited for using fake contests in order to hide the fact that the gifts were going to disc jockeys rather than listeners .^[4]

October and November

Main article: Sony BMG CD copy prevention scandal

A controversy over digital rights management (DRM) software that automatically installed itself on people's computers and made them more vulnerable to computer viruses that was produced and shipped by Sony BMG ensued. The scandal caused numerous lawsuits and Sony BMG ended up recalling all affected CDs.

November 16 - US-CERT, the United States Computer Emergency Readiness Team, part of the United States Department of Homeland Security, issued an advisory on Extended Copy Protection DRM, citing the XCP use of rootkit technology to hide certain files from the computer user as a security threat to computer users and saying that one of the uninstallation options provided by Sony also introduced vulnerabilities to a system.

US-CERT advised, "Do not install software from sources that you do not expect to contain software, such as an audio CD." [4] In its "Top Flops of '05" issue, the enterprise newsweekly eWeek had to create a new category for the "Sony BMG root-kit fiasco." Peter Coffee, of eWeek Labs reported, "The Sony brand name was already in trouble—it lost 16 percent of its value between 2004 and 2005....

Now it has taken a blow among tech-product opinion leaders. "We've never done it before, and we hope we'll never have [an] occasion to do it again but, for 2005, eWeek Labs awards a Stupid Tech Trick grand prize to Sony." eWeek Vol. 22, No.50

2007

In October 2007, it was announced that Sony BMG successfully sued Jammie Thomas. The single mother, who made US$36,000 a year, was ordered to pay US$222,220 in damages for making 24 songs available for download on the Kazaa file-sharing network.

2008

The Federal Trade Commission sued Sony BMG for collecting and displaying personal data of 30,000 minors without parental consent via its websites since 2004, violating the Federal Trade Commission Act and the Children's Online Privacy Protection Act. Sony did not restrict minor children's participation in its websites. Sony paid a $1 million fine.^[5]

See also

Companies portal

• Sony Music Entertainment
• Bertelsmann Music Group
• Big Four
• Sony Music Entertainment Japan, which was not part of Sony BMG, distributed Japanese Music in the US through Columbia or Epic, since around March 2007 when previous distributor, Tofu Records, was closed down
• List of record labels
• List of Sony Music Entertainment labels
• List of Sony Music Entertainment artists
• Columbia House

References

1. ^ Thiel, Simon (2008-08-05). "Sony Buys Bertelsmann Sony BMG Stake for $1.2 Billion". Bloomberg L.P.. http://www.bloomberg.com/apps/news?pid=20601101&sid=awvLxyBlODc4&refer=japan. Retrieved 2008-08-05. 
2. ^ Van Rompuy, Ben (2008) "The standard of proof in EC merger control: conclusions for the Sony BMG saga" IES Working Paper 04/2008
3. ^ Nakashima, Ryan (October 14, 2008). "Sony BMG split-up gives Sony more options". Los Angeles Times. http://articles.latimes.com/2008/oct/14/business/fi-sony14. Retrieved 2009-07-31. 
4. ^ Sony Settles Payola Investigation from the Office of the Attorney General of New York [1].
5. ^ http://www.mercurynews.com/business/ci_11190787?source=rss Sony sued for collecting data on children under 13

• Leonard, Devin (Nov. 28, 2005). "Music Lessons." Fortune, pp. 31–32.

External links

• SonyBMG.com - now redirects to Sony Music Entertainment
• Sony Commercial Music Group (CMG) – Official Site
• Sony Music Entertainment, Incorporated – Company Profile on Yahoo!
• Music Press Coverage of Sony BMG Merger Completion
• Business press coverage of merger completion
• Groklaw Page on Sony BMG DRM Issues and Litigation
• Sony BMG Litigation and Rootkit Info
• Sony BMG Sued for Software Piracy – Assets Seized
• Sony BMG's channel on YouTube