Sony-BMG Could Take Years To Unravel

The latest news concerning Sony-BMG has the two companies looking like a married couple on the brink of divorce, with the European authorities unable to decide whether the two should have been allowed to get hitched in the first place.

The European Court Of Justice, the European Union’s highest court, July 10 threw out a lower court’s decision that said the European Commission, which rules on mergers and monopolies, was too hasty in allowing Sony and Bertelsmann to pool their recorded music business interests.

Over the last three months there’s been a slew of newspaper gossip saying all isn’t well with the marriage and the announcement of a breakup looks imminent.

The German media giant is likely to be willing to let Sony have its half of the business for about £1.5 billion ($2.99 billion), although a couple of things suggest the Guetersloh-based company may have to walk away with a smaller settlement.

Bertelsmann chief exec Hartmut Ostrowski is eager to raise cash for acquisitions and has made clear his dissatisfaction with the music business.

He’s often been quoted as saying it’s good that more people are listening to music than ever but the sector is not easy to monetize.

Also, the credit crunch could mean Sony will see Ostrowski’s target figure as unreachable and try to get him to settle for £1 billion ($1.99 billion), which is about two-thirds of his likely asking price.

If they can reach an agreement the matter will come before the European Commission, which – despite the European Court Of Justice’s July 10 ruling – still faces the prospect of having to look at the original 2004 merger a third time.

The Court Of Justice referred the case back to the Court Of First Instance and told it to reconsider, although that doesn’t mean the lower court won’t take a second look at the evidence and decide that it did get it right the first time.

Meanwhile, the European Commission has approved the merger a second time and independent music companies association IMPALA has challenged it for a second time, which could mean the matter will be doing another lap of the EU corridors in Brussels and Luxembourg.

"Well it certainly puts some question marks over the efficiency of European judicial review, that’s for sure," IMPALA executive chair Helen Smith told Pollstar of seeing the matter bounce back and forth at the EU.

She also pointed out that the lower court can still set the EC’s approval decision aside for a second time and said the July 10 ruling shows the whole EU system for dealing with mergers needs "a complete overhaul" as far as cultural markets are concerned.