Monday, August 11, 2008

Sony and BMG parting company

The Sony/BMG merger that four years ago created the #2 record company is ending with a Sony buy-out. Bertelsmann will walk away with a lovely parting gift -- about $1.2bil, plus some European music rights.

My first reaction was that anybody leaving the music business was probably making a good move, but this article indicates that maybe there's more money still to be made there than I (or a great many others) had thought:
For Sony, the split-up is good news. Analysts say they were surprised to learn that the $3.9-billion company was sitting on such a big cash stockpile. In terms of earnings, Sony Music Entertainment won’t boost the numbers much. But it won’t hurt them, either. They’re expected add 2.2% to sales and almost nothing to profits if Sony consolidates the business in the second half of the fiscal year. (Though profit margins are 8%, profits will be offset by a restructuring charge this year, analysts say.)
8% is not fabulous, but it's certainly OK (the oil industry, which some folks think needs a windfall profit tax, makes about 8.5% or so).

The other reasons for the buyout seem to be that it gives Sony more content for its entertainment businesses, and it puts an end to the internal power struggles that plague so many mergers, and appear to have been a big problem within Sony/BMG.

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