BMG, Universal In Online Duet

Seagram Co., owner of Universal Music Group, and Bertelsmann AG, owner of
BMG Records, Wednesday unveiled an e-commerce alliance worth an estimated $10.4 billion

The announcement, disclosed at a New York press conference, will combine
Universal labels MCA, Geffen, new acquisition Polygram NV, Def Jam,
Mercury, Motown and A&M with Bertelsmann’s entities RCA, Arista, Elecktra
Nonesuch and BMG Classical. Universal is the biggest U.S record company,
holding a 27 percent market share, and BMG follows in second place, with a
17 percent share.

Universal and Bertelsmann will promote and sell CDs from their labels on a new Web site,
Getmusic.com.

The union is the latest move by several record companies to thwart losing sales to digital distribution. Although the companies did not specifically lay out plans to distribute music over the Internet, analysts say that may come later once standards are settled.

While the MP3 format is commonly used by independent artists and a few mainstream ones, the record industry is working to develop a new format that will support digital distribution while ensuring music cannot be distributed without money going to the artists and record labels.

Similiar deals have been made between EMI Group PLC in the U.K. and Japan’s
Sony Music. Last month those companies forged a joint venture in aligning
their sites.

Last month those companies forged a joint venture in aligning
their Internet sites. In addition, Time Warner’s Warner Music and Sony
Music operate an e-tail site, Total E, managed by the Columbia House music
club and co-owned by the companies.

The conglomerates plan to retail not only each other’s artists, but other
record companies’ as well, including the smaller independents. However,
only the companies’ musical acts will be advertised and promoted. Critics
have contended that record company sites are contain limited resources for
consumers, since they e-tail only their own artists’ music.

BMG has already begun promotion of its roster of artists, who include Puff
Daddy, Reba McEntire and Luciano Pavorotti, in sites such as Peeps.com, an R&B site, country music site
Twangthhis.com, and alternative
music site Bugjuice.com.

The new site will face forminable competition from music e-tailers Amazon.com, whose sales have surpassed CDNow, which recently merged with N2K. Amazon reports it has 8 million
customers, while CDNow has 1.6 million. Those sites also generate sales via
their exclusive promotional partnerships with powerhouses AOL, Excite and Yahoo!.