SONY BMG READY TO GO...FOR REGULATORY APPROVAL

As expected, Bertelsmann AG and Sony Corporation today announced that they have signed a binding agreement to combine their recorded music businesses in a joint venture. The newly formed company, which will be known as Sony BMG, will be 50% owned by Bertelsmann and 50% owned by Sony Corporation of America and based in New York.

Sony BMG will combine the recorded music businesses of BMG and Sony Music Entertainment. It will not include the parent companies' businesses in music publishing, physical distribution or manufacturing. Sony Corporation’s recorded music business in Japan, SMEJ, will also be excluded. The merger is subject to regulatory approvals in the U.S. and the European Union.

As first announced on Nov. 6—with the signing of a Letter of Intent—both parties have agreed the Board of Directors of Sony BMG will be made up of an equal number of representatives from Sony and Bertelsmann. BMG Chairman/CEO Rolf Schmidt-Holtz will serve as Chairman of the Board of Sony BMG. Sony Music Entertainment Chairman/CEO Andrew Lack will be Chief Executive Officer of the new company, and is expected to oversee day-to-day operations.

The newly joined Japanese-German behemoth would not only revive the nostalgia of World War II, but would take second place just behind the Universal Music Group in a new Big Four with approximately a 25% marketshare in global sales. In the U.S., Sony BMG would capture almost 29% of overall sales, ranking it as the nation's largest music company, with a tiny margin over UMG.

Bertelsmann AGG Chairman/CEO Gunter Thielen hoisted a sake and munched into a bratwurst and observed: "Our agreement with Sony to form a joint music company shows our strong commitment to the music business. For Bertelsmann, music remains key. We believe in the future of the music business. Sony and Bertelsmann share a vision that this agreement lays the ground work for a company that focuses on the core creative business."

Added Sony Corporation of America Chairman/CEO Howard Stringer: "This agreement represents a bold move to reinvent and revitalize the music business in the 21st century. It is a marriage of well-suited partners, who appreciate the different cultural, creative and business sensibilities around the world. We look forward to working with Gunter Thielen, Rolf Schmidt-Holtz and their colleagues at Bertelsmann AG and BMG, to create an environment where the global music audience can benefit and artistic expression can thrive."

Commented Lack: "I’m confident that the proposed merger will provide us with the opportunity to bring greater value to music consumers around the world, and enable us to more effectively meet the needs of our artists. I know I speak for everyone in the Sony Music family when I say how genuinely pleased I am to be working with Rolf Schmidt-Holtz, as well as the many talented professionals at BMG and its parent company. Hey, this makes it even more fun than the TV business."

Added Schmidt-Holtz: "This agreement assures our future and allows us to maintain what is most important to us: the key creative music centers of BMG and Sony Music in territories and countries around the world. Together we will work to face the challenges of our industry. And personally I look forward to working with our CEO Andy Lack and our new colleagues. When do I get my employee discount on big-screen Wegas?"