Sony & BMG Merger...

[From New York Daily News]

Sony, BMG tie the knot

Layoffs likely in City after big music merger

By PHYLLIS FURMAN
DAILY NEWS BUSINESS WRITER

Music giants Sony and BMG are hooking up - and sharpening their knives.
Heavy layoffs and mogul turf battles that could drag in some of the biggest names in show biz, including music legend Clive Davis, are next on the playlist following yesterday's announcement that the two record companies have formalized their merger plans.

If the deal gets regulatory approval, the new boss of the company to be called Sony BMG - Sony Music chief Andrew Lack - aims to cut between $300 million and $360 million from the annual payroll of the merged music giant, insiders said yesterday.

Bertelsmann-owned BMG Entertainment is expected to take a much bigger hit than its partner, because Lack has already cut a lot of fat at Sony, letting go 1,000 employees this year.

The bloodletting will be especially heavy in New York where both have their U.S. headquarters.

Some of BMG's units are expected to be merged, with fingers pointing to Britney Spears label Jive Records as a candidate to be folded into another BMG division.

Lack will closely scrutinize BMG's Arista Records, run by music hotshot L.A. Reid, sources said. Arista is scoring on the charts with hits from acts like Outkast. But the label's spending heavily and was forced to take big writeoffs on the contracts of underperforming artists like Whitney Houston.

There will be big changes at Sony's headquarters, too, where buzz was heavy yesterday over Don Ienner, the music veteran who was elevated to Sony's North America chief under Lack.

Insiders said they expect Ienner will hold a comparable corporate title at the new company. And that would create an uncomfortable spot for bigwigs like Davis, who runs BMG's RCA Group. Years ago, Ienner reported to Davis when the music legend was running Arista.

Execs at Sony and BMG declined to discuss their plans yesterday and sources said an integration plan for the two music giants has yet to be formalized.

Bertelsmann and Sony see a merger as the best way to cope with a dramatic decline in music sales prompted by rampant piracy and illegal downloading.

Their union would create the second largest music company in the world boasting such superstars as Beyonce, R. Kelly, Barbra Streisand, Bruce Springsteen and Jennifer Lopez.

Reporting to Lack will be BMG COO Michael Smellie, who got the job over Sony Music No.2 Michele Anthony, a music power broker and one of the few high ranking women in the biz.

The deal is seen as a coup for Lack, a music industry novice who spent his career in broadcasting, where he ran NBC News. Rolf Schmidt-Holtz, currently CEO of BMG, would serve as chairman of the new company. But Lack would run the show and report to the board.

NEWSFILE: 13 DECEMBER 2003