Sony and Bertelsmann have agreed to merge their two music operations into a single business and potentially create the world's largest music label.
Both will each take a 50 per cent stake in the joint venture, to be called Sony BMG - if the move wins the support of US, European and other nations' regulatory authorities. The JV's board would contain equal representation from both partners.
Precise terms of the merger - if it goes ahead - were not disclosed. However, both participants said the arrangement would not include their respective music publishing, distribution and manufacturing operations.
If the deal goes through, it will take the JV's global market share to 26 per cent - just ahead of the current market leader, Universal, which current has around 24 per cent of the market.
Sony and BMG have been in merger talks for some time. Right now, EMI and Time Warner are also discussing bringing their two music businesses together. If their talks go the way of Sony and BMG's, and they too gain regulatory approval, then the world will end up with three major labels and an almost perfect four-way split between them and the collected independent labels, which together account for around 25 per cent of the world music market.
The main hurdle remains the anti-trust authorities. A previous attempt by EMI and Warner to merge their music businesses in 2000 collapsed on fears that the European Commission would not sanction the deal. That led to talks between EMI and BMG, which also failed to reach a conclusion. ®