Sony & BMG D-I-V-O-R-C-E

Sony & BMG D-I-V-O-R-C-E

This is Celia Hirschman with On the Beat for KCRW.

Sony/BMG, now the second largest music conglomerate since their merger just 2 years ago, might be looking for a separation. It seems that the 170 year-old media giant, the Bertelsmann Music Group, otherwise known as BMG, is under pressure to raise billions of dollars to buy out Groupe Bruxelles Lambert, a company with a 25% stake in Bertelsmann. If they don't raise the cash, the shareholder has threatened to take the stock public. BMG has always closely held its interests and is not eager for a public offering.

The combined value of Bertelsmann's investment in Sony/BMG, with its music labels and publishing operations, is approximately $4 billon. It's still short of the estimated $6 billon that the shareholder's stake is valued at. However, of all the Bertelsmann interests, it appears that the music conglomerate is the one they feel most comfortable parting with.

This news comes at an awkward time. Sony and BMG have had a tumultuous relationship since their merger, with both companies having difficulty finding common ground. It was just a little more than a month ago, in a high profile tug of war, that BMG executives convinced the music conglomerate board to oust Sony chairman Andrew Lack, who had masterminded the original merger. Lack was moved upstairs, and his chairmanship was replaced with Sony/BMG executive Rolf Schmidt-Holtz.

Still, this could be good news for Sony, who has never seemed comfortable in sharing their business with its BMG partners. Now, Sony will have the right to buy the music joint-venture, but if it decides not to do so, Bertelsmannn would have to find a buyer willing to be in a partnership with the Japanese group or persuade Sony to also sell its stake. Groupe Bruxelles Lambert is not going to make any moves until their own stockholders meeting in May, so look for more action on this very important developing story.

In other news, in London this week, the little label that made rock music famous went to court to battle it out once again with Apple Computers. Apple Corps, the company that brought you The Beatles, has always owned the rights to its logo, the partially eaten apple.

Rumor has it, computer magnet Steve Jobs, was a massive Beatles fan, and named his computer company after the record label. In 1981, in an effort to protect their trademark, Apple Corps sued Steven Jobs and won, for an undisclosed amount. In 1991, they sued again, this time winning an agreement that Apple Computers would not enter the music business. Now, in 2006, Apple Corps was forced to sue Apple Computers yet again, this time as the iTunes retail store boldly features the famous Apple Computers logo.

Apple Computers claims they have not changed their business strategy, maintaining hardware sales income far outweighs sales from the music downloading store. They offered Apple Corps a million dollar settlement, which was rejected. After three lawsuits, I would imagine Apple Corps is tired of going to court to prove something that is pretty obvious to everyone. It's hard for me to see Steven Jobs winning this one.

Apple Computers can't have it cut both ways. Either they're in the music business or they're not. If they're not, I know a few other digital music companies that would like to pick up their customer base.

This is Celia Hirschman with On the Beat on KCRW.