(CelebrityAccess MediaWire) — Bertelsmann has reportedly notified corporate partner Sony that it does not wish to renew the contract of Sony BMG Music Entertainment CEO Andy Lack.
The New York Times reported that under the terms of the two companies’ global joint venture, Bertelsmann is not able to independently fire Mr. Lack. It is unlikely that the joint venture would retain a CEO without the backing of both sides, the executives involved in the discussions told the paper.
Lack was an executive at NBC television who had never worked in the music industry before being put in charge of Sony’s own music unit less than three years ago.
Lack has approximately six months remaining on his current contract, which Sony has the authority to extend briefly.
Bertelsmann’s reported decision comes after a series of setbacks at the Sony BMG, the world’s second-largest music company, including a sharp fall in market share in the United States. Executives at the company told the Times that Lack’s management style had also alienated certain executives both above and below him.
Lack’s supporters claim Bertelsmann’s stance is only a play to retain power after the expected departure of the venture’s COO, Michael Smellie, who is the most senior executive from the Bertelsmann side. Mr. Smellie alerted the company in July that he planned to leave by the end of the year to spend more time with his family. Company executives now say an exit by Lack may prompt Smellie to reconsider.
Lack’s supporters also said the move was a result of political friction between the two companies, and not based directly on performance. At this point, Sony still has the authority to name a new CEO.
Mr. Lack was brought into the company with hopes that he would bring a completely new perspective to tackle the industry’s structural problems. Lack’s first major move was to pursue a joint venture with Bertelsmann, and the companies combined trimming $400 million in costs by eliminating 2,000 jobs and integrating offices around the world.
But since taking over the combined venture, critics say Mr. Lack has failed to fulfill expectations. In the quarter ended in June, the Sony BMG recorded revenue of $1 billion and a net loss of $18 million when restructuring charges are included.
For the first half of the year, Sony BMG’s share of sales of new releases in the U.S. was only 26 percent, down from 33 percent when the two companies first combined. Universal, the largest music company, increased its market share to 36 percent.
Many of Mr. Lack’s more unconventional ideas have not yet shown results, such as working with the President of Grokster, a file-sharing network accused in an industry-wide lawsuit of copyright infringement, to design a new, authorized service that might prove popular with online music fans. The service, Mashboxx, is not yet available. –by CelebrityAccess Staff Writers