Sony and BMG are merging their music divisions in an effort to ... to do what? That's what Forbes asks:
- In theory, the merged company will benefit from reduced overhead and bigger market share, and may also prevent rivals EMI Group and Time Warner's Warner Music Group from consummating a deal of their own. Conventional wisdom is that European Union regulators may sign off on a Sony/BMG deal, which would reduce the number of major record companies from five to four, but might balk at a second deal to shrink the industry even further.
....But industry skeptics wonder how much better a combined company will be in tackling the problems that beset the entire music business: declining sales; difficulty developing new acts who can last more than album; and piracy, both digital and traditional. "I think these are pathetic Band-Aids that don't do anything in the long run," says an attorney who represents artists signed to both labels.
How effective a Band-Aid will it be in the short run? The merger is predicated in part on cost cutting, but all five major music companies have already been shrinking their headcounts through the industry's three-year slump: BMG cut staff in the fall of 2001, though the company subsequently bought Zomba, home of 'N Sync and Britney Spears, last year.
Sony reduced its head count by 10%, to 9,000 employees, this year after bringing on Lack from NBC. Howard Stringer, who heads up Sony's U.S. arm and its entertainment group, plans to trims another 1,700 jobs in the next three years from his music and movie divisions.
"The people at Sony are maxed out. They're working their a---- off," says a manager who represents one of Sony's music acts. "At what point does working you're a-- off become burning out?"
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