So, it was another good year for fans of major label mergers - with loads of talk and chat and news about major record companies combining their operations. Though in the end no majors merged and, in fact, one may as yet have to demerge.
The two record companies that got closest to merging were, of course, EMI and Warner, both now dwarfed by rivals Universal Music and SonyBMG. Both companies see the potential benefits of combining their operations to create a new enterprise of similar size to those aforementioned competitors, though neither can quite agree on how that should be done. Neither is interested in a joint venture like that which created SonyBMG (owned 50/50 by Sony Corp and Bertelsmann), probably because that arrangement led to so much tension in the SonyBMG board room back in 2005. But neither EMI nor Warner is especially interested in completely selling out to the other either. It was thought Warner Music, led by Edgar Bronfman Jnr and his investment buddies, would be more likely to sell, but when EMI made an offer for his company Bronfman Jnr quickly turned them down, and made a counter-offer to buy EMI. In the end, both sides resisted the other's advances and while EMI has had subsequent takeover talks with a third party private equity firm (not officially named, but thought to be Permira), as far as we know neither Warner nor EMI are currently in talks with each other or third parties regarding merger or takeover. Meaning there has been no radical change of major label ownership in 2006.
Although, a decision in the European Courts this year might lead to a radical change in the ownership of SonyBMG next year (as well as arguably stopping EMI and Warner from considering future thoughts of merger). Pan-European trade body IMPALA's case against the European Commission decision to allow Sony and Bertelsman to merge their record companies back in 2004 finally got to court this year, reaching a verdict in July. In a surprising move, the Court ruled in favour of IMPALA and said that, on the evidence available to it at the time, the Commission should not have allowed Sony and BMG to merge. The ruling means that the Commission will now have to reconsider the merger proposal, even though the company has now operated as one entity for nearly eighteen months. SonyBMG remain confident their merger will be approved for a second time, though it is not at all clear what the company would be obliged to do if it was not. IMPALA insist it would have to split off into two separate companies again. In the meantime, the ruling meant that both EMI and Warner had to put their merger thoughts on hold - because an EMI Warner merger was unlikely to get EC approval while the SonyBMG merger remained unresolved.
Of course this time last year gossip suggested that SonyBMG might split back into two companies of its own accord anyway, as a result of the continued tensions in the board room, where former Sony people and former BMG people seemed to disagree about pretty much everything. Although I suppose what they really disagreed about was whether or not former Sony Music chief Andy Lack should have the top job at the merged record company - the Sony guys said 'yes', the BMG guys a resounding 'no'. All of which meant that once Lack and former BMG chief Rolf Schmidt-Holtz swapped jobs at the start of this year - so that Lack took a back seat Chairman role while Schmidt-Holtz took over the more proactive CEO role - many of those tensions seemed to go away, and SonyBMG chiefs could put post-merger issues behind them and concentrate on growing their business. And fighting European court attempts to split them up. And dishing out large sums of money to all sorts of people in the ongoing fallout from the embarrassing rootkit debacle of 2005 (as I write this I hear they will pay out $4.25 million in rootkit compensation in the next month after 39 US states followed Texas' lead and took action against them). In the UK, however, the SonyBMG team were quite far removed from all this politics and litigation, concentrating instead on an internal restructure early in the year which saw SonyBMG UK, which had operated as one unit since the 2004 merger, split back into two distinct divisions - Columbia and RCA. They also got a new boss, after Rob Stringer took a job running the Sony Label Group in the US, and Ged Doherty took over the top job in the UK.
This section is headlined 'no mergers', which is true in the major label domain, though in the indie world PIAS and Wall Of Sound merged their operations right at the start of the year. Elsewhere in the independent sector, the Virgin Group sold off its remaining shares in V2 to merchant bank Morgan Stanley, although Richard Branson kept a tiny stake in a personal capacity. Right at the end of the year Warner announced it was buying a majority stake in metal label Roadrunner, while earlier in the year the Beggars Group had announced a partnership with Warner in order to launch a Japanese operation.
Cross-sector music company the Sanctuary Group continued to struggle along following its financial woes of recent years - and after allegations of dodgy financial reporting somewhere along the line, the company's top man and co-founder Andy Taylor was kicked out. Further statements from the company's board admitted that the financial situation at the company remained bleak, though they nevertheless knocked back a takeover approach from their smaller rival cross-sector music company, the MAMA Group, owners of the Channelfly empire.
Talking of financial woes, certain independents, especially in the dance sector, could as yet be facing hardships following the collapse of indie music distributor Intergroove this Autumn - though it is as yet unclear how much Intergroove's clients will lose as a result of the collapse, and whether it will be enough to prove fatal in some cases.
Actually, despite this section's headline, there was, in fact, a merger in the major music company domain this year, albeit one still requiring regulator approval as we speak. Quite early on in the year rumour had it that the Mohn family, majority shareholders in German conglom Bertelsmann, who own half of SonyBMG of course, were planning on buying out one of their minority shareholders - GBL - in order to stop them from floating their share on the stock exchange. In order to do that Bertelsmann needed to sell one of its assets to raise some cash, and for a while everyone thought they might sell their 50% share in SonyBMG, possibly to Sony Corp, possibly to someone else. In the end, though, they announced they would sell off their music publishing company instead, and so the bidding began for BMG Music Publishing. Bertelsmann picked Universal Music as its preferred buyer - with Universal planning to merge BMG's publishing house with its own publishing company. But, in the light of the European court's ruling on SonyBMG, that announcement led to much debate as to whether a merger in the music publishing sector would be allowed, given the concerns of consolidation in the recorded music sector. Bertelsmann and Universal reckon it will be, but the European Commission has said it will need to undergo an in-depth investigation of their proposals before it can form an opinion, which means no decision will be reached until the middle of 2007. And you can bet IMPALA, still in a buoyant mood following its victory in the SonyBMG case, will do everything it can to block this merger too.