Category: Business

Sony, BMG Combine Their Music Businesses
LOS ANGELES – Sony Music Entertainment and BMG, the music unit of the German media conglomerate Bertelsmann AG, said Thursday they have formally combined their music businesses.
The new company, Sony BMG Music Entertainment, will rival Vivendi’s Universal Music Group for market share.
Sony BMG, which will be headquartered in New York, instantly becomes home to a stable of hit-makers, including Britney Spears, OutKast, Aerosmith and Travis Tritt. The company also now controls a catalog of works by music veterans like Elvis Presley, Miles Davis, Johnny Cash and Stevie Ray Vaughan.
Sony Corp. and Bertelsmann each own half of the new combined company. The deal did not include the parent companies’ music publishing, manufacturing or physical distribution businesses. Sony Corp.’s recorded music business in Japan, SMEJ, was also not part of the new joint venture.
The Federal Trade Commission approved the merger last week.
Andrew Lack, Sony Music’s former chairman and chief executive, was named chief executive of the new company. Michael Smellie, the former chief operating officer of BMG, and Kevin Kelleher, Sony Music’s former executive vice president and chief financial officer, were also retaining their positions.
A Sony BMG spokeswoman said executives were not available for interviews late Thursday.
As it integrates operations, Sony BMG Music Entertainment might cut as many as 2,000 jobs, according to published reports. The cuts would save about $350 million.

Sony, BMG Combination Gets U.S. Antitrust Approval
WASHINGTON (Reuters) – U.S. antitrust authorities on Wednesday approved a deal for record companies Sony Music and BMG to merge, creating a rival to market leader Universal Music.
The U.S. Federal Trade Commission said it would not oppose the combination of Sony Music, a division of Japanese electronics giant Sony Corp., and BMG, a unit of German media conglomerate Bertelsmann AG.
“Upon further review of this matter, it now appears that no additional action is warranted by the commission at this time,” the agency said in a letter to each of the companies.
BMG said in a statement that the reviews by U.S. and European antitrust officials had been “diligent.”
“We now look forward to creating a global recorded music company comprising many of the world’s most successful artists as well as a vast catalog of recordings,” BMG said in its statement.
Combining the Sony Music and BMG creates a company with revenues of as much as $5 billion and brings under one roof such artists as Britney Spears, Usher, Elvis and Beyonce.
The FTC approval comes a week after the European Commission endorsed the deal. The EC imposed no conditions, but warned that it would look closely at any further proposed consolidation in the industry.

Sony-BMG merger approved by EU
BRUSSELS — Independent record companies Tuesday threatened to go to court to challenge Sony and Bertelsmann’s creation of the world’s second largest music company after failing to convince European Union antitrust regulators to block the deal.
The European Commission unconditionally approved the 50-50 joint venture between Japan’s Sony Music and BMG, the German media giant’s music unit, late Monday after finding insufficient evidence the deal would harm consumers.
The deal is expected to win U.S. antitrust clearance within days, bringing Sony artists like Aerosmith, George Michael and Barbra Streisand and BMG’s Avril Lavigne and Elvis Presley under one roof.
In its decision, the commission indicated it believed its initial concerns about competition in the market were not entirely unfounded.
“The commission will keep a close watch on the music sector as it becomes even more concentrated and would very carefully scrutinize any further major concentration in the industry,” it said.
The deal will reduce the number of music “majors” from five to four. Sony and BMG argued they needed to join forces to deal with declining CD sales and the threat from illegal downloading on the Internet.
But independent labels fear the merger will make it even tougher for their artists to gain exposure and shelf space in a market increasingly dominated by mega-stores.
Martin Mills, chairman of the Beggars Group label and board member of Britain’s Association of Independent Music, noted BMG posted record operating profits of around $37.2 million US in the first half of this year.
“This merger is not about economic necessity in a changing market, as BMG’s stellar figures demonstrate,” he charged. “It is about the desire to dominate and to control the outlets at media and retail through which news of wonderful new music is disseminated.”
Impala, a group representing 2,000 smaller labels, is considering challenging the deal in court, said spokesman Jean-Luka Monte.
But antitrust lawyers noted such challenges by third parties are extremely rare, with very little likelihood of success.
“It’s about as close to zero as you can get,” said Stephen Kinsella, an international business expert with the Herbert Smith law firm in Brussels.
Universal Music holds the top spot in Europe, with Sony-BMG pulling ahead in the United States. The rivals control about a quarter each of the $32 billion US global music market.
The other two majors are EMI and Warner Music, with about 30 per cent of the global market between them.
Four years ago, EMI and Warner scrapped a proposed hookup in the face of EU charges that fewer majors could reduce competition and lead to higher prices and less choice for consumers.
A renewed courtship was cut short last year when former Universal Music chief Edgar Bronfman Jr. stepped in to buy Warner for $2.6 billion US.
Similar concerns emerged in the EU’s initial appraisal of the Sony BMG deal, with antitrust chief Mario Monti’s team suggesting “tacit collusion” in setting CD prices among the five majors.
But after closed-door hearings and an internal review, the commission backed down, saying it “had to conclude . . . that the evidence found was not sufficient to demonstrate in a successful way that co-ordinated pricing behaviour existed in the past.”
Reducing the number of majors to four “would not yet create a collectively held dominant position” in recorded music, it said.
The reversal of the EU’s position on the merger reflects new hurdles instituted by the commission since European courts overturned three merger-blocking decisions in 2002.

Sony, BMG to Lay Off 2,000 Staffers -Sources
LOS ANGELES (Hollywood Reporter) – About 2,000 staffers worldwide will be let go as a result of the upcoming merger between recording industry giants Sony Music and Bertelsmann Music Group (BMG), sources said.
The combined company is expected to reap cost savings of $300 million-$360 million a year, according to industry insiders.
The European Union’s antitrust division is expected to announce approval of the merger as soon as Tuesday. The international restructuring of Sony BMG is expected to be complete by June 2005 and will mostly affect back-office operations, sources said.
Representatives from Sony and BMG declined comment Friday. Sony’s artist roster includes Jessica Simpson, Destiny’s Child and Audioslave. BMG acts include recent U.S. chart-toppers Usher, Avril Lavigne and Velvet Revolver.
The board of directors of the combined Sony BMG will comprise members of both companies. Andrew Lack, chairman and CEO of Sony Music Entertainment, will helm the merged company as CEO, with BMG chairman and CEO Rolf Schmidt-Holtz serving as the chairman of the board.
News that EU antitrust chief Mario Monti would approve the merger leaked last month. The EU’s main concerns, according to the antitrust office’s sealed 51-page statement of objections, have been fixed pricing on CDs and market collusion. Only four years ago, the EU opposed a deal between EMI and Warner Music Group for the same reasons.
Insiders said Monti’s decision to allow the union of Bertelsmann AG and Sony Corp.’s music divisions came after the commission concluded that the evidence of price collusion and market dominance was not solid enough to justify blocking the merger.
If the merger is passed by U.S. regulators, the combined Sony BMG would be the world’s second-largest music company, behind Universal Music Group.
The new entity will be 50%-owned by both groups and based in New York. The merger includes both companies’ recorded music businesses but not music publishing, physical distribution or manufacturing operations. Sony’s recorded music business in Japan also would be excluded.

New trade terms see cost of EMI CDs rise $2 to $10 at HMV stores in Canada
TORONTO (CP) – A dispute between music label EMI and retailer HMV is hitting music fans and indie artists like Sum 41 and Oh Susanna in the pocketbook.
Experts say the price increases – between $2 and $10 – for CDs by artists such as Nickelback, Janet Jackson, Norah Jones, Radiohead and Sarah McLachlan, are just the latest manifestation of the industry’s woes.
The increases, which took effect in early April, are due to a squabble over the wholesale price of EMI’s CDs, and all the indie labels it distributes.
Both sides have been guarded about discussing the issue saying “trading terms” between the companies are confidential. However, each concedes that money is at the heart of the problem.
HMV wants EMI to maintain its volume discount on CDs so the chain can sell new releases at a cheaper price and get music lovers into its stores – rather than big-box competitors like WalMart and Costco.
“EMI chose to reduce the level of support that they had previously offered HMV,” Humphrey Kadaner, president of HMV Canada, said in an interview with The Canadian Press.
As a result, Kadaner said HMV can’t give EMI distributed products the same level of “value-added” support it gives other labels.
That means EMI artists don’t get priority placement near the front of stores, their songs don’t get played inside the stores and they’re not listed on HMV’s chart wall – often the first place a consumer will look when entering a music shop.
Kadaner said under the new trade terms, EMI passed on a higher price to HMV. Subsequently, the chain had to pass the hike on to the consumer, he said.
“We passed it on proportionally. We’ve maintained the same margin as before. We have not tried to use this as a vehicle to drive any incremental profitability,” said Kadaner.
For its part, EMI Canada says it can’t afford to capitulate to the chain’s demands because sales at the chain dropped about 25 per cent last year.
Further, label head Deane Cameron says the label did not raise its CD prices.
“It’s not fair for us to have trading terms that reward HMV for their volume if their volume is not there,” he said. “HMV is selling a lot more DVDs these days. That’s why we’re getting elbowed out.”
He added: “We asked them to consider different trading terms. That wasn’t received too well and we appear to be in the penalty box. It’s disappointing for artists to be punished to this extent.”
It’s far from the first time HMV, which holds the leading market share of pre-recorded music in Canada, has fought to increase its bottom line. Two years ago a messy dispute with Warner over wholesale prices pushed HMV to pull all Warner CDs from its stores.
It’s no secret the CD market has been troubled in recent years. The Canadian Recording Industry Association says that on a per-capita basis, the Canadian music industry has been one of the hardest hit of any country in the world by illegal file swapping. Retail sales have decreased by more than $425 million since 1999, says the organization.
To stay afloat, HMV started selling DVDs a few years back, which some say saved the chain from bankruptcy.
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“When this whole downloading thing happened their music business tanked,” said Maureen Atkinson, senior partner at J.C. Williams Group, a retail and marketing consulting firm. “They really struggled, as did the recording industry.”
But this latest ripple has more victims than just EMI. The label consists of 70 music labels representing over 1,500 artists around the world. In Canada, EMI distributes CDs for smaller independent labels, including Nettwerk, Popular, Marquis and Aquarius.
It’s these smaller Canadian indie labels – which support home grown talent like Sum 41 and Broken Social Scene – that find themselves the biggest victims of EMI and HMV’s trade fallout.
They have the most to lose because their artists aren’t sold in big box stores like Future Shop and WalMart – which mostly only carry Top 40 CDs with very little back catalogue – and rely on specialty stores to sell their stuff.
“It’s just not fair. Do they care that by raising the Oh Susanna disc to $28 they make it impossible for people to buy her CD in their store,” said Terry McBride, CEO of Nettwerk. “That hurts the artist. That artist is a person. They’re not a corporate entity.”
Customers have already said the price of CDs is too high, added McBride.
“It’s extremely short-sighted because people are already buying less and less CDs. The reason why HMV and EMI are having this little tussle is because EMI margins have been shrunk, the marketplace is shrinking and every player in this business needs to come to terms with that and be part of the solution – not get into these stupid little trade wars. Nobody wins.”

Rocker Courtney Love Owes Millions – Report
LOS ANGELES (Reuters) – Add financial woes to the long list of worries bedeviling rock star Courtney Love.
The trouble-prone musician claims in the upcoming issue of Blender magazine that she has been swindled out of $40 million, while a former business associate says she is in debt to the tune of at least $4 million.
Love, the 39-year-old widow of late Nirvana frontman Kurt Cobain, is already dealing with a stack of legal and health concerns, and her music career suffered a recent blow when her long awaited debut solo album bombed.
“I’m covered with loser dust,” she was quoted as telling Blender, whose May issue featuring the Love cover story will hit newsstands on April 20.
Love told Blender that “… $40 million has been stolen from me and (11-year-old daughter) Frances by a fiduciary institution.”
She added, “I found out that our dog walker was making $100,000. One person put a BMW on my credit card. My daughter’s trust fund has been stolen from to the point where she may have, like, nothing. I can’t let this happen to Frances.”
Blender said “multiple parties close to Love agree that a large sum of money is unaccounted for,” while a former business associate who had access to her accounts in the past six months told Blender she is at least “… $4 million in debt.”
Love faces two separate trials in Los Angeles, one for misdemeanor disorderly conduct and being under the influence of a controlled substance, and the other for two felony counts of unlawful drug possession. She also temporarily lost custody of Frances, her only child with Cobain, who shot himself in the head 10 years ago.
Love’s album “America’s Sweetheart,” released by EMI GroupPlc’s Virgin Records unit, spent just four weeks on the Billboard Top 200 chart.

ABBA Says ‘No’ to Reunion – at Any Price
LONDON (Reuters) – Nothing — not even $2 billion — could tempt ABBA back together again. After 30 years, the Swedish supergroup might even have trouble remembering the words of its pop classics.
The sight of the group’s outrageous stage outfits is enough to make its 58-year-old songwriter Bjorn Ulvaeus cringe nowadays.
Thirty years to the day after ABBA won the Eurovision song contest with “Waterloo,” the bearded Ulvaeus is fiercely proud of its music — but the group will never strut its stuff again.
Four years ago, ABBA was offered $1 billion to reunite. The answer was ‘No.’ But what if that figure doubled?
“No, not even if you did that,” Ulvaeus told Reuters.
“It is never going to happen again. I think it is a bit too long now. We split up in 1981. People haven’t seen us as a group since then and it would come as such a disappointment to them.”
As for the spangly jumpsuits, Ulvaeus said: “I haven’t squeezed into them for years. I still had a couple of them in the wardrobe and would get into them on a Saturday evening — but not any more. They are in a museum now.”
Tuesday marked another ABBA milestone — the musical “Mamma Mia,” which is based on their hit songs, celebrated five years playing to packed houses in London.
ABBA songs may be staple fare in karaoke bars around the world but songwriter Ulvaeus would need prompting.
“I cannot remember a whole lyric of any that I have written,” he confessed.
“I am translating them into Swedish now for the first time because we are doing a production in Sweden at the beginning of next year. I find that I don’t know them by heart — not one of them.”
ABBA once ranked alongside Volvo as Sweden’s most famous export. The “Mamma Mia” show could prove even more profitable than the 350 million ABBA albums sold around the world.
“It’s possible,” Ulvaeus said.” “‘Mamma Mia’ is going to run for a longer time than ABBA did. So who knows? We will see.”
With 11 productions running and six more in the pipeline, it has grossed over $750 million worldwide and has been seen by more than 10 million people.
The musical weaves in ABBA music to tell the story of a single mother living on a Greek island with her daughter, who is getting married.
Reading her mother’s diary, she finds any one of her mother’s three lovers could be her father. All get invited to the wedding.
Ulvaeus reckoned the timing was perfect.
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“I think the world perhaps was ready for something happy, a comedy. The big musicals in the ’80s and the beginning of the ’90s were rather somber – like “Phantom of the Opera” and “Les Miserables” — wonderful musicals but of a different kind.”
Ulvaeus still shakes his head in wonderment.
“I am fiercely proud, amazed and astonished. I thought this would be a little show running for perhaps a year in a small theater in London.”
The two couples who made up the group’s acronym — Agnetha, Bjorn, Benny and Anni-Frid — have long since divorced but all is sweetness and light between them now.
“We do indeed stay in touch,” he said. “I met Agnetha last week. We have a grandchild who is 3. We meet much more often these days than we did perhaps 10 years ago.”

Disney Film Studio Hopes for Texas-Size ‘Alamo’
LOS ANGELES (Reuters) – Walt Disney Co. is hoping its new movie “The Alamo” will put up a good fight at U.S. box offices this Friday after a quarter in which it failed to deliver a hit and lost a lucrative film deal with the makers of “Finding Nemo.”
The $98 million “Alamo,” a re-telling of 1836’s legendary battle in Texas’ fight for independence from Mexico, is a huge bet for the studio. Movies have fueled Disney’s earnings for the past several quarters with hits like “Nemo,” which it co-produced with Pixar Animation Studios Inc.
In January, Pixar walked away from renewing a long-term film deal with Disney that had produced five smash hits with $2.5 billion at box offices globally. Last week, Disney debuted its animated “Home on the Range” to poor ticket sales of $14 million and No. 4 placement at domestic box offices.
“A lot is riding on the Alamo,” said Paul Degarabedian, head of movie-tracking service Exhibitor Relations. “This is a movie that they have a lot invested in. They’ve really been pushing it on the marketing side.” The Alamo debuts April 9.
Degarabedian said Disney’s box office results so far this year are similar to 2003 except for one crucial bit. Last year, it released comedy sensation “Bringing Down the House” in the first quarter to $132 million in domestic ticket sales.
Disney’s six movies this year had brought in $197 million in ticket sales by April 4, while the five films last year had grossed $286 million by the same point, he said. He added that most of the studio’s fortunes rested on the summer.
SOME HOT, MOST NOT
In a teleconference with investors last week, Disney’s chief executive officer Michael Eisner said the movie studio group “is on fire,” but the heat has been lukewarm at best through 2004’s first three months.
“Range” cost $80 million to $100 million to produce and may lead Disney to take a financial charge, some analysts said — although others expect it to gain speed overseas.
Western-style epic “Hidalgo” cost $85 million to $90 million to make, and its box office is only at $60 million.
Disney’s top-grosser so far this year is ice hockey movie “Miracle” with a comparatively small $63 million in ticket sales, but it was made on a relatively low budget.
Eisner said last week word-of-mouth and expected reviews for “Alamo” looked good. “I won’t oversell it because I don’t want to disappoint,” he told investors on a conference call.
Studio chief Dick Cook told Reuters at the “Alamo” premiere in San Antonio that “No one movie makes or breaks a studio … that is crazy.”
But a poor performance by “Alamo” would put pressure on Eisner, Schwab SoundView analyst Jordan Rohan said in a research note.
Moreover, poor performance could also nudge the board toward negotiating with Comcast Corp., the cable company eager to buy Disney, Rohan said.
“With or without Eisner, if Comcast takes over Disney at a premium, the stock will go up,” Rohan added.
Beyond “Alamo” the bottom line may look less black this year partly because 2003 was so good.
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“Last year was just a phenomenal year,” said David Miller, financial analyst at Sanders Morris Harris.
In 2003 the studio had an internal rate of return on its movies of 25 percent, excluding “Nemo,” Miller said, quoting chief financial officer Tom Staggs. This year, Miller expects between 9 percent and 13 percent.

‘Simpsons’ Stars Strike for More D’oh – Report
LOS ANGELES (Reuters) – The actors who provide the voices for the cartoon characters on the long-running TV show “The Simpsons” have stopped work in a bid to force a settlement of lengthy contract renewal talks, Daily Variety reported in its Thursday edition.
The Hollywood trade paper said the six actors have not shown up for two script readings in the past few weeks, holding up production on the hit satire’s upcoming 16th season.
It quoted insiders as saying each cast member is asking for about $360,000 an episode, or $8 million for a 22-episode season. Each member currently earns $125,000 an episode. The highest-paid star in TV is Ray Romano, who reportedly earns between $1.7 million and $2 million per episode of his Emmy-winning series “Everybody Loves Raymond.”
The three-year contracts for Dan Castellaneta (Homer), Hank Azaria (Moe, Apu, Comic Book Guy), Harry Shearer (Mr. Burns and others), Yeardley Smith (Lisa), Julie Kavner (Marge) and Nancy Cartwright (Bart) expired several months ago, and their representatives have been negotiating new ones to no avail, Daily Variety said.
The last “Simpsons” work dispute was in 1998, at a time when the actors were making $30,000 per episode. The show’s producer, Twentieth Century Fox TV, hired casting directors in five cities to replace most of them before both sides worked out a new deal and resumed production.
“The Simpsons” airs in the United States on the Fox network. Both Fox and Twentieth Century Fox TV are owned by News Corp. Ltd.

TIGERSHACK
Tiger Woods to spoof the movie Caddyshack in an upcoming American Express commercial. The ad will feature Woods battling the movie’s gopher, and finally using his American Express card to hire an exterminator.