Sony BMG Music Entertainment began as the result of a 50–50 joint venture between Sony Music and Bertelsmann Music Group completed on March 4, 2004. It is one of the Big Four music companies and includes ownership and distribution of recording labels such as Arista Records, Columbia Records, Epic Records, J Records, Mchenry Records, Jive Records, RCA Victor Records, RCA Records, Legacy Recordings, Sonic Wave America and others. The merger affected all Sony Music and Bertelsmann Music Group companies worldwide except for Japan, where it was felt that it would reduce competition in that country's music industry significantly. Financial analysts covering the merger anticipated that up to 2,000 jobs would be cut as a result, saving Sony BMG approximately $350 million annually. The company's chief executive officer is Rolf Schmidt-Holtz, who succeeded Andrew Lack on February 10, 2006. In the first half of 2005, the company's share of new releases in the United States declined from 33% to 26% according to Nielsen SoundScan. This, and Lack's negotiation of what some called an "ill-conceived" deal with Bruce Springsteen led to Bertelsmann informing Sony that it would not renew Lack's contract. The company signed a content deal with the popular video sharing community YouTube. On August 5, 2008 Sony Corporation agreed to buy Bertelsmann AG's 50 percent stake in the music company for $1.2 billion to get full control. The music company was renamed Sony Music Entertainment and became a unit of Sony Corporation of America. This allowed Sony the rights to artists on the current and historic BMG roster and allowed Sony Corporation to better integrate its functions with its PlayStation 3 and upcoming new media initiatives. As part of the buyout, Bertelsmann kept the rights to master recordings by 200 artists, which formed the basis for a second version of BMG. Sony and Bertelsmann last teamed up in 2013, in a failed bid to acquire Parlophone from Universal Music Group. BMG would administer the label's back catalogue, while its current artists would sign with Sony. While Sony BMG failed to win Parlophone, BMG acquired Mute Records' back catalogue and licensed Depeche Mode and the catalogue of The Echo Label to Sony.
Controversies
Payola fine
In July 2005, Sony BMG was fined $10 million after the New York Attorney General's office determined that they had been practicing payola mostly in the form of direct payments to radio stations and bribes to disc jockeys to promote various artists including Franz Ferdinand, Audioslave, and mainly Jessica Simpson. Epic Records, one of their labels, was specifically cited for using fake contests in order to hide the fact that the gifts were going to disc jockeys rather than listeners.
Rootkit scandal
On 31 October 2005, a scandal erupted over digital rights management software produced and shipped by Sony BMG that automatically installed itself on people's computers and made them more vulnerable to computer viruses. The scandal and attendant controversy about the practice of software auto-installation spawned several lawsuits. Sony BMG eventually recalled all of the affected CDs. On November 16, 2005, US-CERT, the United States Computer Emergency Readiness Team, part of the United States Department of Homeland Security, issued an advisory on Extended Copy Protection DRM, citing the XCP use of rootkit technology to hide certain files from the computer user as a security threat to computer users, saying that a Sony-provided uninstallation option also introduced computer system vulnerabilities. US-CERT advised, "Do not install software from sources that you do not expect to contain software, such as an audio CD." In its "Top Flops of '05" issue, the enterprise newsweekly eWeek had to create a new category for the "Sony BMG root-kit fiasco." Peter Coffee, of eWeek Labs reported, "The Sony brand name was already in trouble—it lost 16 percent of its value between 2004 and 2005.... Now it has taken a blow among tech-product opinion leaders. "We've never done it before, and we hope we'll never have occasion to do it again but, for 2005, eWeek Labs awards a Stupid Tech Trick grand prize to Sony." eWeek Vol. 22, No.50
In October 2007, Sony BMG, alongside other large music firms, successfully sued Jammie Thomas for making 24 songs available for download on the Kazaa file-sharing network. Thomas, who made US$36,000 a year, was ordered to pay US$222,000 in damages. Thomas had allegedly shared 1702 files in total; the court upholding the award called it an "aggravated case of willful infringement".
