Bertelsmann, the German media group, is trying to renegotiate its shareholder agreement with Sony, its music joint-venture partner, in a move that will make it easier to sell its way out of recorded music.
The two sides are understood to have had discussions about shortening the length of the five-year agreement governing the SonyBMG joint venture, which runs until 2009 and prevents either side from selling or transferring its half-interest.
Although Bertelsmann said last week that it was keeping its 50 per cent stake in the recorded music business, the negotiations demonstrate that its long-term commitment to the company behind Bruce Springsteen and Kelly Clarkson remains uncertain. Bertelsmann has announced plans to offload its wholly owned music publishing arm, which owns the copyright of songs written by Coldplay and Robbie Williams. It hopes that the auction will raise about €1.5 billion (£1 billion).
Selling music publishing is intended to help the private German group, whose overall interests range from book publishing to television broadcasting, to offset the €4.5 billion cash cost of buying out Groupe Bruxelles Lambert, its minority investor.
Renegotiating the SonyBMG shareholder agreement will make it easier for Bertelsmann to sell out, probably by selling either to Sony or to an ally of the Japanese group, which remains reluctant to increase its exposure to music when it is fighting to sort out its electronics operations.
The existing agreeement is understood to give either party pre-emption rights over the other party’s half-share and a say in any third-party investor that could be brought into the business, ranked No 2 in the world behind Universal Music.
SonyBMG is run by Rolf Schmidt-Holtz, the former Bertelsmann executive who took charge after a shareholder dispute in which Andrew Lack, the former Sony man, was forced out in favour of the German. Sony insiders say that Herr Schmidt-Holtz has immediately established close communication with the Japanese group’s New York operation, which has been interpreted as an attempt to safeguard his job in the long term.
During Mr Lack’s short tenure, costs were slashed, but the combined group lost market share and suffered technological problems as a botched implementation of copyright protection software forced it to compensate consumers in the United States. His approach, designed to boost profitability, unsettled Bertelsmann, which lobbied successfully for his removal.
Despite the problems of integration, SonyBMG remains the envy of its rivals. EMI, which is about half its size in terms of recorded music, is trying to buy its slightly smaller rival Warner Music in an attempt to catch up. An initial bid from EMI was rejected in early May, and it is expected that the British group will return with an improved offer.
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