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First half hit streak heats up BMG profits
NewsStand - Thursday, September 09, 2004

NY Post
TIM ARANGO

Bertelsmann's music unit BMG, which recently closed its merger with Sony Music, marked a big turnaround in its first-half earnings on the back of hits from artists such as Usher and Outkast.

The hot streak came at the right time for BMG, which is now involved in the complicated process of integrating the two companies.

But unlike most seemingly good results from music companies of late, BMG's were driven by producing hit albums rather than from cost-cutting.

BMG's revenue for the first half jumped 23 percent to $1.44 billion compared with $1.17 billion during the year-earlier period. BMG also swung to an operating profit of $88.8 million from a loss of $127 million.

Cost cutting only played a small role the company shed about 200 jobs in March after BMG restructured its U.S. division and folded its Arista label into the RCA Music Group.

In addition to hit records from Usher and Outkast, other artists driving sales were Avril Lavigne, Britney Spears, Maroon 5 and Velvet Revolver.

"The division accelerated the momentum that began during the second half of 2003 by continuing to reinforce its creative focus and marketing edge," Bertelsmann said in a statement. "In fact, organic growth was in the double digits when adjusted for negative currency effects."

Regions that were strong included the U.S., U.K., Australia and Germany.

Meanwhile, Sony Music also saw a boost in earnings this year, thanks to a massive restructuring last year that included the shedding of about 1,000 jobs and the consolidation of much of the back-office functions of its two main labels, Epic and Columbia.

Under Andrew Lack, who became Sony Music's CEO in 2003 and is leading the newly merged company, Sony Music went from an operating loss of $72 million to a gain of $182 million during Lack's first year on the job.

SonyBMG, which closed its deal in early August, plans to lay off up to 2,000 employees in an effort to chop about $350 million in annual costs.

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