Aphorism among optimistic music industry types for the past few years: The music business isn’t in trouble — the music labels are in trouble. The logic: People are spending plenty on music — via iPods, concert tickets, ring tones etc. They’re just not very interested in spending much on actual music recordings.
Here’s Bertelsmann CEO Hartmut Ostrowski’s version, via the NYT: “The good thing is, more people are listening to music than ever before,” he said. “The bad thing is, it is not easy to monetise it.”
This explains why Hartmut wants to get out of Sony BMG, the 50/50 JV he owns along with Howard Stringer’s company. So what explains Sony’s interest in buying Bertelsmann’s stake? The JV’s sales dropped another 4% in the last 12 months ending in March of this year, and we assume that number would be much worse if you accounted for the weak dollar. And it has yet another big restructuring in the works.
But if Howard Stringer can get his German partners to sell at a steep discount, we don’t think it’s a terrible idea. Our version of the aphorism: Investing in new music is a sucker’s bet right now. But owning a big catalogue of stuff people already know and like — like, say, Elvis and Johnny Cash and AC/DC — can be a valuable asset, especially if you manage costs well.