Business

Sony-Bertelsmann deal approved

EC gives unconditional OK to merger of music units

Compiled From Wire Reports

BERLIN The European Commission has approved unconditionally a merger between the music units of Sony Corp. and Germany’s Bertelsmann AG to create the world’s second-largest music company, with a 25 percent market share, the two companies said Monday.

“The merger was approved without conditions,” Bertelsmann spokesman Oliver Herrgesell said.

The EC, the executive body of the European Union, opposed the merger plan in late May between Sony Music Entertainment Inc. and Bertelsmann’s BMG, saying the deal was unacceptable under EU competition law.

However, EU Competition Commissioner Mario Monti reversed his merger team’s decision to reject the deal after two days of closed-door hearings in June with the companies and third parties, including independent labels and companies involved in the emerging market of online music downloading.

“We are pleased that the EC has recognized that the creation of Sony BMG is an appropriate and necessary response to current market conditions,” Sony Music Entertainment Chief Executive Officer Andrew Lack said in a statement.

Bertelsmann said it is now looking forward to concentrating on the integration of the two companies.

“The joint venture will create a recorded music business better able to serve artists and consumers in this rapidly changing marketplace,” Bertelsmann Chief Executive Gunter Thielen said in a statement.

The deal will leave 80 percent of the market in the hands of four groups: Sony-BMG, Vivendi Universal, EMI and Warner Music. Sony-BMG and Vivendi Universal control about a quarter each.

The EU initially said the deal could lead to higher CD prices, fewer choices for consumers and stifle the development of legal online music downloading.

But it concluded after an internal review that it did not have sufficient evidence of collusion or future harm to consumers.

Independent music companies have lobbied against the deal and have threatened legal action to overturn the EU’s decision.

Impala, an umbrella group for more than 2,000 independent labels, said the merger will further reduce small companies’ ability to give artists sufficient exposure.

The 50-50 joint venture is still undergoing antitrust review in the United States and approval is expected within days.

“BMG and Sony are now working closely with the U.S. Federal Trade Commission and are optimistic that final action will be forthcoming in the very near future,” Bertelsmann said in a prepared statement.

The merger will bring together Sony stars such as Barbara Streisand and Beyonce and BMG stars, including Christina Aguilera.

The Japanese and German parent groups argue that their businesses need to join forces to tackle the crisis in the global music industry faced with both pirate CDs and an explosion of illegal music downloading.

But the latest case of media consolidation comes at a cost.

According to reports, Sony and BMG plan to ax a quarter of their joint workforce, or 2,000 jobs, once the tieup has been approved.

The green light from Brussels comes four years after the European Commission effectively blocked another music tieup, between EMI and Time Warner.

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