March 25, 2023

Media Decoder Blog: Sony Makes Deal for Electronic Dance Music

In the latest sign of the music industry’s gold rush over electronic dance music, Sony Music has struck a deal with a leading independent dance label, Ultra Music. The arrangement calls for the labels to share acts, and gives one of Sony’s divisions distribution rights to Ultra’s catalog in North America, which includes top D.J.’s like Deadmau5, Steve Aoki, Calvin Harris and Benny Benassi.

As part of the deal, announced on Wednesday, Sony will make an unspecific investment in Ultra, and Patrick Moxey, Ultra’s president, will be named Sony’s president for electronic music, reporting to Doug Morris, the chief executive of Sony’s music division.

The arrangement raises Ultra’s profile considerably, and will give it access to some of Sony’s vast resources: the label, for example, will be able to use Sony artists for its popular compilation albums, like “Ultra Weekend” and “Ultra Dubstep.”

Ultra, which has become a substantial dance-music empire, including an artist-management arm, will also help promote Sony acts. With the distribution arrangement — through Sony’s Red division, which distributes recordings from many independent labels — sales of Ultra albums will also contribute to Sony’s market share, a source of constant competition between Sony and its biggest rival, the Universal Music Group.

The news was first reported earlier on Wednesday by The Financial Times.

EMI Takes Shape: Since Universal closed its $1.9 billion deal for EMI Music, the company has moved quickly to establish a management team for its labels in the United States, and with a few announcements this week, much of that team now appears to be in place.

On Wednesday, Universal said that Ron Fair will be chief creative officer of Virgin Records, one of the flagship labels of EMI’s new Capitol Music Group. Mr. Fair, formerly of Universal’s Geffen label, is a hitmaker of long standing. He signed Christina Aguilera and guided her early career, and has also worked with Black Eyed Peas and the Pussycat Dolls.

Universal also announced on Wednesday that Ashley Burns, an EMI employee for more than a decade, would be Virgin’s general manager. Earlier this week, it was announced that Greg Thompson, EMI’s top marketing and promotion executive, who is said to have been instrumental in many of the label’s successes in recent years, like Lady Antebellum and Coldplay, would be the executive vice president of the Capitol Music Group.

In November, Steve Barnett left his position as co-chairman of Columbia Records, a Sony label, to join EMI as the chairman of the Capitol group.

As a condition imposed by European regulators, Universal is selling about a third of EMI’s recorded music assets, including the rights to release music by major acts like Coldplay and Pink Floyd. That auction is under way.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

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Media Decoder Blog: Re-emerging BMG Buys Rights to ’80s Hits From Culture Club and the Like

2:51 p.m. | Updated BMG Rights Management, which in just four years has become a major music-publishing company, has expanded once again with a $90 million deal for some 30,000 songs, including a slew of 1980s hits by Culture Club, Tears for Fears and the Human League.

And in a separate deal that will contribute to the re-emergence of BMG — and its parent company, the German media giant Bertelsmann — as a power in the music business, the company is also in the advanced stages of a deal to buy Mute Records, a one-time independent label whose catalog includes albums by Depeche Mode and Moby. That deal, which is estimated to be worth between $11 million and $15 million, is not signed but nearly completed, according to several people briefed on the negotiations who were not authorized to speak about it.

In a statement on Friday announcing the publishing deal, Hartwig Masuch, BMG’s chief executive, said he was “delighted to have won the opportunity to represent the writers of those songs and demonstrate to them BMG’s commitment to 21st-century service.”

Both deals came about as a result of the $4.1 billion breakup of EMI last year. Sony led an investor group in a $2.2 billion bid for EMI’s publishing assets, and the Universal Music Group bought the record labels for $1.9 billion. But in their review of the deals this year, European regulators required divestments from both as a condition of approval.

In a statement, Universal said it had “begun the sale process” of Mute with BMG. A spokesman for BMG declined to comment.

The publishing assets had been part of EMI and Sony/ATV, and in addition to the ’80s hits include rights to songs by contemporary artists like Robbie Williams, Amy Winehouse and Duffy, as well as some rights to a number of Nirvana songs. The copyrights for music publishing are for the music and lyrics underlying each song, as opposed to recordings, and it is not uncommon for multiple publishers to have ownership or administration interests in a single song.

BMG did not give a price for the deal, but several people with direct knowledge said it was for about $90 million. That is significantly lower than the estimates reported when the auction began several months ago, when the songs were reported to be valued at well over $100 million. But other dynamics in the EMI sales may have contributed to the change.

The Warner Music Group was said to be the only major bidder to oppose BMG in the publishing deal, but Warner is said to be more interested in the some of the larger assets being sold as a result of Universal’s $1.9 billion takeover of EMI’s record labels. Those assets include Parlophone, one of EMI’s flagship labels, whose artists include Coldplay and Kylie Minogue.

BMG Rights is a joint venture between the German media giant Bertelsmann and Kohlberg Kravis Roberts, and was founded in 2008 after Bertelsmann sold its music interests — also once known as BMG, for Bertelsmann Music Group — to Sony and Universal.

Since then, the revived BMG has quickly become a force through acquisitions of publishers like Bug, Cherry Lane and Chrysalis. It says that it manages the copyrights for more than one million songs, and it is estimated to have about $400 million in revenue next year.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

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Media Decoder Blog: In EMI Bid, Universal Considers a Sale

To get European regulators to approve its $1.9 billion takeover of EMI, the Universal Music Group may do something once considered unthinkable: sell Parlophone Records, which releases the music of Coldplay and Radiohead and is the heart of EMI’s holdings in Europe.

According to a report in The Financial Times late Thursday that was corroborated by one person briefed on the talks, executives from BMG Rights Management, a music company backed by Bertelsmann and Kohlberg Kravis Roberts, have met with Universal over a possible sale of Parlophone. Representatives for Universal, EMI and BMG all declined to comment.

The fact that Parlophone is on the table is a sign of how troubled Universal’s talks with the European Commission have become. Universal, whose global market would swell to more than 40 percent if it absorbed EMI, entered the talks two weeks ago hoping it could gain the commission’s approval by offering to sell European rights to a relatively small number of songs. After its early offers were found inadequate, Universal looked to sell off independent labels that EMI had acquired over the years, like Virgin, Chrysalis and Mute. In its latest strategy, Universal is considering keeping those smaller labels and selling Parlophone.

In an interview this week with Dow Jones, Joaquín Almunia, the European competition commissioner, described the talks with Universal as being “very tough.” Last month, the commission sent Universal a nearly 200-page “statement of objections” that reportedly rejects many of Universal’s central arguments in favor of the merger.

While any Parlophone deal would most likely include the bulk of its extensive catalog, it would exclude EMI’s ultimate jewel, the Beatles, according to The Financial Times’s report and the person briefed on the talks, who was not authorized to speak publicly about it. Parlophone’s artists include stars like Kylie Minogue, Blur, Gorillaz and the Verve. The label also handles the European releases for other acts signed to EMI’s American branches, like the Beastie Boys, but it is unlikely that a sale would include rights to those artists’ music.

Peeling off Parlophone could have an adverse effect on the value of Universal’s overall deal for EMI. Universal assumed all regulatory risk in the transaction, agreeing to pay about 90 percent of the full sale price by September, whether the deal is approved by regulators or not. If Universal is forced to sell big pieces of EMI for less than it paid, and also loses some of the $157 million it expected in annual savings, the deal could end up far more expensive for Universal.

Universal has until Wednesday to make its formal submission of remedies to the European Commission, although it may do so earlier. Its proposal will then go through “market testing” with competitors, and the commission will have until Sept. 27 to make a final ruling.

In the United States, the Federal Trade Commission is investigating the deal.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

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Apple Is Called Poised to Offer ‘Cloud’ Music

Apple has entered the final stages of negotiations with the major record labels and music publishers for a service that will allow people to upload and store their music on the Web and listen to it on smartphones, tablets or computers — so-called cloud-based music.

Amazon and Google introduced similar services weeks earlier. Apple’s service, though, is expected to be easier to use, and to find a ready market in the 200 million people who have iTunes accounts.

The company has signed contracts with Sony Music Entertainment, EMI and the Warner Music Group to license those labels’ recordings for its new service. It is still negotiating with Universal Music Group, the largest of the four labels, but that deal could be finished as early as next week, according to several people briefed on the talks who spoke on condition of anonymity because the deals were private.

Analysts said Apple might announce the new service as early as next month, when it hosts its annual developer conference in San Francisco.

Apple declined to comment, as did the record labels.

Like Amazon’s Cloud Drive and Google’s Music Beta, Apple’s new service will provide access to remote servers that can store digital music files and stream them to users’ computers, smartphones and other devices. But since Amazon and Google did not get licenses from record companies, their music programs are essentially storage systems, which require users to upload the music they already own before they can play it, a process that can take hours.

Having label licenses would allow Apple to design a more elaborate and efficient system. For instance, Apple’s service is expected to be able to scan people’s iTunes libraries and match their songs to a single master collection on the company’s servers, eliminating long upload times.

Apple might also introduce features like sharing songs with friends, and the ability to listen to a song on different devices without having to connect them first to a computer.

“For most of us who have multiple devices, it is annoying to have to tether them to our computer every time we buy a new song,” said Dave Goldberg, who in 1994 founded Launch Media, an online music start-up that was later bought by Yahoo.

Although Apple has nearly finished its talks with the labels, it still must obtain licenses from music publishers, who control the copyrights for a song’s underlying composition, as opposed to recordings, and who also represent songwriters. Most of the major publishers are owned by the labels but are operated separately, and their permission is essential to offer the more advanced features.

In 2003 Apple opened its iTunes store, which transformed the music business, selling more than 10 billion songs. Now the music industry is eagerly awaiting Apple’s entry into cloud-based music. The company has been expected to release a cloud service since at least 2009, when it reportedly spent $80 million to buy Lala, a start-up that allowed users to play music they already owned from the Web. Shortly after the deal closed, however, Apple shut down Lala.

Apple also built a large data center in North Carolina, which company officials said would handle music and other services.

The exact timing of the announcement of the service may depend on when Apple closes the publishing deals and whether the technology is ready to go.

“Apple doesn’t announce anything until it is ready,” said Tim Bajarin, an analyst with Creative Strategies, adding that Apple could also wait until next fall. “We know that the data center is online, but we don’t know whether the software components and the service pieces will be ready by next month.”

Analysts also said Apple was likely to pass on the cost of the new contracts with the music labels and publishers to consumers by charging for the streaming service. While some consumers may balk at having to pay extra to listen to music they already own, many will pay for convenience, they predicted. And the cloud music service could be somehow integrated with a new version of MobileMe, Apple’s online subscription service that offers storage and other features. Apple is widely believed to be working on a revamped version of MobileMe, which has long been considered a flop.

“I don’t think it is something they will have to give away for free, at least initially,” said Gene Munster, an analyst with Piper Jaffray. Mr. Munster said the service could be bundled with MobileMe.

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