Filter looks at the day's top technology news through snapshots and analysis of what the world's media outlets are covering. Washingtonpost.com's new Mon.-Fri. feature is penned by technology reporter Cynthia L. Webb. If a technology story breaks, a company falters or triumphs, or there's a new trend in technology, Filter wants you to know about it.
By Robert MacMillan washingtonpost.com Staff Writer
Friday, November 7, 2003; 10:35 AM
And a-one, two, a-one two three four... five billion!
That's right -- $5 billion -- that's how much money in annual music
sales Sony and the Bertelsmann Music
Group would generate if the companies merge.
Rumors started Wednesday that two of the giants of the
recording industry wanted to pool their resources, and the
companies came clean about it on Thursday. It's hard to say what's
really driving the merger, though most news sources accepted the general
principle that it's to fight steady, punishing losses in the face of
CD piracy and the illegal trade of copyrighted music files on the
Internet.
From The Los Angeles Times: "The music industry on Thursday was
poised to shrink from five giants to three in a last-ditch effort to
survive. Sony Corp. and Bertelsmann formally announced plans to merge
their recorded-music operations as rivals Time Warner
Inc. and EMI Group continued negotiating a
similar hook-up — deals that would put the overwhelming majority of
the world's music catalogs into the hands of three players."
The Times said that the merger proposal is "unprecedented, but it
might be unavoidable."
More from the Times on the erosion effect of the Internet and
piracy: "Global revenue has shrunk by about 25% over the last three
years. One recent report estimated sales of pirated
or counterfeit CDs at more than $4 billion a year.
It's a crisis that labels have only begun to fight with
consumer-friendly digital delivery systems for music that could hinder
Internet bandits determined to steal music."
•
The
Los Angeles Times: Music Firms Turn to Each Other to Survive
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The Wall Street Journal pointed out that the European
Union will prove an especially difficult regulatory body to
impress: "EU regulators say they treat companies on a first-come,
first-served basis by examining the marketplace at the time a merger
or joint venture is proposed. That should benefit the first company
to officially notify Brussels of a completed deal.
Yet in past merger situations, the EU also has taken into account
other possible deals and how industries are evolving. If both the
Sony-BMG deal and the EMI-Warner Music deal somehow gained approval --
an iffy proposition at best -- those two players would be of roughly
equal size to the current industry leader, Vivendi Universal
SA's Universal Music Group."
The New York Post cited an anonymous source saying that the deal
"was a masterstroke by Andy Lack," who the paper said
joined Sony Music in February to jolt the company out of its slump.
Lack and BMG chief exec Rolf Schmidt-Holz both would
hold top positions in the merged company if all goes well, the Post
reported.
•
The New York
Post: BMG, Sony Music Seal Merger Deal
The Washington Post one-upped the other papers by snaring Lack for
an interview: "It's a pretty classic situation where you're in an
industry that is struggling and is fragile and has a lot of very tough
challenges," Lack said. "You look for a partner to help you weather
the storm. On a stand-alone basis for Bertelsmann and Sony, it's an
extremely tough go. You need someone to link arms with."
The Post also detailed Sony's and BMG's financial woes: "For the
first six months of 2003, Sony Music reported a $52 million loss,
trimmed from the $142 million loss the company suffered in the first
half of 2002. Part of the gains came from Sony Music's decision to lay
off 1,000 employees earlier this year. At BMG, a $51 million loss
through the first half of 2002 widened to a $134 million loss through
the same period of this year, the company reported in September."
•
The
Washington Post: Two to Make Music Together
