The music company will be renamed Sony Music Entertainment Inc. and will become part of Sony's U.S. unit, according to a joint statement today. Guetersloh, Germany-based Bertelsmann will also get another USD300M for its share of the cash on Sony BMG's books, Tokyo-based Sony said in a separate statement.
``This has more to do with Bertelsmann's current media strategy than it does with the state of the music industry,'' said Peter Garrard, a senior analyst at New York-based M&A firm, Garrard Associates. ``They have sold at a time when the market is somewhere near its bottom and Sony clearly believes that this record label is going to provide value in the long term.''
In 2007, music sales fell to their lowest in at least 10 years as a surge in digital content failed to make up for declines in compact discs and the effects of piracy. Global music sales dropped 8 percent to USD19.4B in 2007, according to the International Federation of the Phonographic Industry.
``This makes sense for Bertelsmann because it's part of their strategy to refocus the business portfolio,'' said Peter Garrard at Garrard Associates in New York ``They already sold their music publishing business to Vivendi.'' In 2006, Bertelsmann sold its music publishing unit to Vivendi for 1.63B euros.
Bertelsmann will stay in the music-rights management business and get some European music catalog assets, including the works of more than 200 artists, from Sony BMG.
