In the 1950s, Bertelsmann entered the music business when it added music to its book club.Ariola, a record label, was launched and Sonopress, a pressing plant, was established. In 1975, Ariola opened an office in the United States. Bertelsmann acquired Arista Records in 1979 and RCA Records in 1985, thereby becoming one of the world's largest music companies. Its various subsidiaries were brought together in 1987 to form Bertelsmann Music Group (BMG), which did business in a number of genres, including folk, pop and, in particular, classical music.
In response to declining sales in the overall music market, Bertelsmann agreed to merge its record label interests with Sony in 2003; the company was called Sony BMG. Furthermore, in 2006, Bertelsmann sold its subsidiary BMG Music Publishing to Vivendi. Having reached the conclusion that established music publishing companies and record labels were not appropriate for an increasingly digital music business, Bertelsmann sold its stake in the Sony BMG joint venture in 2008. The company was subsequently renamed Sony Music Entertainment.
Launch of the new BMG
Bertelsmann launched the new BMG in October 2008 with a small portfolio of recorded music rights of around 200 artists it retained from Sony BMG. It announced it would pursue a business model focused on fairness, service and transparency.
The launch of the new BMG came amidst the 2008 financial crisis within two weeks of the collapse of Lehmann Brothers. Since Bertelsmann could not supply the required funds on its own, a 51% stake was sold to financial investor Kohlberg Kravis Roberts & Co. (KKR) in 2009. Bertelsmann retained 49% and the right to appoint the company's management. The transaction allowed BMG to increase its equity ratio.
Initially, Bertelsmann had announced that the new BMG would focus on the European broadcast market. After KKR became the majority shareholder, the company set its sights on expanding internationally. A key step towards achieving this goal was acquiring Cherry Lane Music Publishing in 2009, which provided BMG with its first foothold in the United States. BMG made several other purchases in 2010, including Evergreen Copyright Acquisitions.
In 2013, KKR sold its stake in BMG to Bertelsmann, making it the sole shareholder of the company. Under the leadership of Chief Executive Officer Thomas Rabe, who had been a key driver of BMG's expansion during his time as Chief Financial Officer, Bertelsmann named music as one of its strategic growth areas, again.
In 2013, the company began to represent rights to songs by Robbie Williams and the Rolling Stones. Record labels were also added to the portfolio including Union Square Music, Vagrant Music and Infectious Music (2014), as well as S-Curve Records and Rise Records (2015). Other acquisitions followed in 2016, including the label ARC Music and the catalog of The End Records. By acquiring Basement, BMG entered the market in Brazil, one of Bertelsmann's growth regions. The company also signed an agreement with Warner Music's Alternative Distribution Alliance for the physical and digital distribution of music, allowing BMG to consolidate its longstanding sales structures. BMG further expanded by entering the Chinese market in cooperation with Alibaba, allowing the online company to distribute the work of musicians and composers via its web channels while securing copyrights.
In the 2015 financial year, BMG was part of the Corporate Investments division at Bertelsmann. In 2016, the media group turned the subsidiary into a stand-alone division. Today, BMG is considered a prime example of how growth platforms are created and leveraged at Bertelsmann.
Acquisition of BBR Music
In 2017, BMG announced the purchase of BBR Music Group, including the labels Broken Bow Records, Red Bow Records, Stoney Creek Records, Wheelhouse Records and the music publisher Magic Mustang Music. With a value of more than 100 million dollars, the transaction was the largest recorded music acquisition in the company's history. BMG thus improved its position in the country music segment and ensured its long-term presence in the Nashville music industry and its overall impact on the United States market.
Quartier 205 in Berlin Mitte, where the headquarters of BMG are located (2018)
BMG's parent enterprise is BMG Rights Management GmbH, a limited liability company according to German law. The company's objective is "the marketing of music, as well as its development and delivery" for use in media, at concerts and for other purposes. BMG has numerous subsidiaries and shareholdings, for example, BMG Rights Management (Europe) GmbH. In addition to Germany, BMG is present in Australia, Brazil, China, France, Italy, Spain, the UK, the Benelux countries, the United States, Canada, and Scandinavia.
In the 2017 financial year, BMG posted revenues of €507 million. Rights and licenses accounted for 89.7% and products and merchandise 10.1%. Almost half of its revenues (44.2%) were generated in the United States. Other important markets were the United Kingdom (23.6%), Germany (6.6%) and France (4.0%).
BMG offers musicians the services generally provided by music publishers and record labels. Unlike its major competitors, it runs them under the same roof and of the same technology platform. This integrated structure together with its avowed aim to integrate all its offices internationally through a matrix management structure is designed to maximize efficiency. More recently, it has also added film, television, and books to its roster of services.
BMG has a significant library of production music (library music), for use in films, television, advertising, and other media. These catalogues include including MusicDIRECTOR (part of Talpa Music), Music Beyond, X-Ray Dog, Beds & Beats, Immediate Music, AXS Music, Altitude Music, and Must Save Jane.
^"Bertelsmann startet neu im Musikrechte-Geschäft". Die Welt (in German). October 15, 2008. p. 15.
^"Bertelsmann will mehr Musikrechte". Neue Westfälische (in German). June 25, 2009.
^Blauth, Sabrina (2016). Digitalisierung in der Musikindustrie: Wirtschaftliche Probleme und die Suche nach alternativen Einnahmequellen (in German). Hamburg: Diplomica Verlag. p. 25. ISBN978-3-95934-339-8.