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| Company type | Joint venture |
|---|---|
| Industry | |
| Predecessors | |
| Founded | August 6, 2004; 21 years ago (2004-08-06) |
| Defunct | October 1, 2008; 17 years ago (2008-10-01) |
| Fate | Bertelsmann's share acquired by Sony |
| Successors | |
| Headquarters | , U.S. |
Key people | David Gordon (chairman, Sound & Vision) |
| Products | Music |
| Owners | Each of 50% owned by: |
| Website | web |
Sony BMG Music Entertainment was an Americanrecord company owned as a 50–50joint venture betweenSony Corporation of America andBertelsmann. The venture's successor, the revivedSony Music, is wholly owned bySony, following their buyout of the remaining 50% held byBertelsmann. BMG was instead rebuilt asBMG Rights Management on the basis of the remaining 200 artists.[1][2]
Sony BMG Music Entertainment began as the result of a merger betweenSony Music (part ofSony) andBertelsmann Music Group (part ofBertelsmann) completed on August 6, 2004. It was one of theBig Four music companies and includes ownership and distribution ofrecording labels such asArista Records,Columbia Records,Epic Records,J Records, Mchenry Records,Jive Records,RCA Victor Records,RCA Records,Legacy Recordings,Sonic Wave America and others. The merger affected all Sony Music and Bertelsmann Music Group companies worldwide except for Japan, where it was felt that it would reduce competition in that country's music industry significantly.
Financial analysts covering the merger anticipated that up to 2,000 jobs would be cut as a result, saving Sony BMG approximately$350 million annually.
The company's chief executive officer (CEO) wasRolf Schmidt-Holtz, who succeededAndrew Lack on February 10, 2006. In the first half of 2005, the company's share of new releases in the United States (US) declined from 33% to 26% according toNielsen SoundScan. This, and Lack's negotiation of what some called an "ill-conceived" deal withBruce Springsteen led to Bertelsmann informing Sony that it would not renew Lack's contract.
The company signed a content deal with the popular video sharing community YouTube[citation needed].
On August 5, 2008, Sony Corporation agreed to buy Bertelsmann AG's 50 percent stake in the music company for $1.2 billion to get full control. The music company was renamed Sony Music Entertainment and became a unit of Sony Corporation of America.[3] This allowed Sony the rights to artists on the current and historic BMG roster and allowed Sony Corporation to better integrate its functions with its PlayStation 3 and upcoming new media initiatives. As part of the buyout, Bertelsmann kept the rights to master recordings by 200 artists, which formed the basis for asecond version of BMG.
Sony and Bertelsmann last teamed up in 2013, in a failed bid to acquireParlophone fromUniversal Music Group. BMG would administer the label's back catalogue, while its current artists would sign with Sony.[4] While Sony BMG failed to win Parlophone (which ultimately went toWarner Music Group), BMG acquiredMute Records' back catalogue and licensedDepeche Mode and the catalogue ofThe Echo Label to Sony.[5]
Epic Records, one of their labels, was specifically cited for using fake contests in order to hide the fact that the gifts were going to disc jockeys rather than listeners.[6]
On 31 October 2005, a scandal erupted overdigital rights management (DRM) software produced and shipped by Sony BMG that automatically installed itself on people's computers and made them more vulnerable tocomputer viruses. The scandal and attendant controversy about the practice of software auto-installation spawned several lawsuits. Sony BMG eventuallyrecalled all of the affected CDs.
On November 16, 2005,US-CERT, theUnited States Computer Emergency Readiness Team, part of theUnited States Department of Homeland Security, issued an advisory onExtended Copy Protection DRM, citing the XCP use ofrootkit technology to hide certain files from the computer user as a security threat to computer users, saying that a Sony-provided uninstallation option also introduced computer system vulnerabilities.
US-CERT advised, "Do not install software from sources that you do not expect to contain software, such as an audio CD."[7] In its "Top Flops of '05" issue, the enterprise newsweeklyeWeek had to create a new category for the "Sony BMG root-kit fiasco." Peter Coffee of eWeek Labs reported, "The Sony brand name was already in trouble—it lost 16 percent of its value between 2004 and 2005....
Now it has taken a blow among tech-product opinion leaders. "We've never done it before, and we hope we'll never have [an] occasion to do it again but, for 2005, eWeek Labs awards a Stupid Tech Trick grand prize to Sony." eWeek Vol. 22, No.50
In October 2007, Sony BMG, alongside other large music firms, successfully suedJammie Thomas for making 24 songs available for download on theKazaa file-sharing network. Thomas, who made US$36,000 a year, was ordered to pay US$222,000 in damages. Thomas had allegedly shared 1702 files in total; the court upholding the award called it an "aggravated case of willful infringement".[8]
In 2008, theFederal Trade Commission sued Sony BMG for collecting and displaying personal data of 30,000 minors without parental consent via its websites since 2004, violating theFederal Trade Commission Act and theChildren's Online Privacy Protection Act. Sony did not restrict minor children's participation in its websites. Sony paid a $1 million fine.[9]
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