Sony Corp. is moving closer to selling off its half of Sony/ATV Music Publishing, after recently triggering a clause in its contract with its co-owner, the Michael Jackson estate, that allows one party to buy out the other, according to people familiar with the matter.
The world’s biggest music-publishing company, Sony/ATV is co-owned by Sony and the estate of the late pop star. Sony and Jackson—and after his 2009 death, his estate—have jointly owned the company since 1995, each with a 50% stake.
Sony/ATV’s catalog includes the copyrights to most of the Beatles’ songs, as well as songs by stars ranging from Marvin Gaye and the Rolling Stones to pop’s Taylor Swift and dance music’s Calvin Harris. Unlike record labels, which own and distribute sound recordings, music publishers own rights to lyrics and melodies and license them out for various uses—including recordings released by record labels.
Music industry veterans estimate Sony/ATV’s value at around $2 billion. Sony hasn’t put a price tag on its share yet, the people familiar with the matter said, adding the process isn’t a public auction pending the outcome of direct negotiations between Sony and the Jackson estate.
Lenders were notified when Sony triggered the exit clause last month, these people added. There is no guarantee the process will result in Sony selling its half.
Sony/ATV’s structure grants both partners the right to counter any offer to buy out the other side, as well as to bid for the half each doesn’t own.
The potential sale of its stake of Sony/ATV could help Sony raise cash following a multiyear restructuring aimed at shrinking the Japanese company’s dependence on its beleaguered consumer-electronics businesses, such as televisions and mobile phones.
Sony’s net profit more than tripled during the quarter ended June 30 to ¥82.44 billion ($685 million), thanks to strong sales of videogames and smartphone image sensors. While the music-publishing business is profitable, generating ¥66.9 billion in revenue for Sony last year and a projected ¥70.1 billion this year, according to Sony regulatory filings, it doesn’t mesh with Sony’s other businesses and operates separately even from Sony’s record label, Sony Music Entertainment.
Sony appears to have been considering the sale of its Sony/ATV stake for a nearly a year, if not longer.
The potential sale was mentioned in emails among top Sony executives in November of 2014—emails that were among thousands of documents stolen by hackers and posted online.
In one email exchange following a planning meeting last year, Sony Corp. of America Chief Financial Officer Steve Kober wrote to Sony Entertainment Chief Executive Michael Lynton that they were trying to keep the potential sale “top secret.”
Jackson, the late pop star, bought ATV Music Publishing for $47.5 million in 1985, and sold Sony a 50% stake for more than $100 million in 1995. Jackson died in 2009 while preparing for a comeback tour.
In 2012, Sony and Jackson’s estate joined other investors, including Abu Dhabi’s Mubadala Development Co. and music mogul David Geffen, to acquire EMI Music Publishing for $2.2 billion, and Sony/ATV Music now generates revenue administering the EMI catalog for the investor group.
It isn’t clear whether Sony would package its share of EMI in a sale.
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