According to Reuters, the time is fast approaching which will see German media giant Bertelsmann sell its 50 per cent stake in Sony BMG Music Entertainment to joint-venture partner Sony Corp.
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The Sony board is due to meet on July 29 to discuss the future of the 4-year-old venture, whose artists include Britney Spears, Bob Dylan and the Foo Fighters.
Although Bertelsmann had originally considered a target sale price of about $US2.8 billion, “the difficult economic climate and tough credit conditions mean that a price tag closer to a meager $US1.5 billion is far more likely”, says the Reuters report.
Over the years, Bertelsmann has grown increasingly dependent on its pan-European broadcasting division, RTL Group, its main revenue engine and also controls publishing assets such as Random House.
And Sony appears to be the only entity interested in acquiring Bertelsmann’s stake. Unlike EMI Group for example, Sony BMG doesn’t include a lucrative music publishing business that might attract other private equity bidders.
Analysts note that any spinoff of Bertelsmann’s stake would also have to be approved by U.S. and EU regulators, who “could raise concerns about vertical integration at Sony, given that its hardware business includes a joint venture with handset giant Ericsson for Walkman music-enabled mobile devices”.
But this is the sweet spot for Sony: by trying to drive its business model towards mobile phones, as the phone is quickly becoming the prime music listening device, a Sony-owned BMG would control not only the music delivery platform, but the recording rights to that music as well having alliances with the likes of Apple and its iTunes platform.
This verticalisation or convergence if you like, will surely be tested by a number of consumer regulators worldwide, including quite possibly among them, Australia’s ACCC.