BMG Completes $2.74B Purchase of Jive/Zomba

By | November 27, 2002 at 12:00 AM

Bertelsmann Music Group has completed its Jive lessons.

The major label group said Tuesday it has closed its acquisition of Zomba Music Group, home to teen-pop label Jive Records, paying more than $2.74 billion to acquire the stakes in the closely held group it didn’t already own. BMG already held 20% of Zomba’s record labels and 25% of its music-publishing portfolio.

The deal, which got rolling in June after Zomba owner Clive Calder triggered a long-standing “put” option to sell his interest, gives BMG full access to Jive’s roster of pop megastars, including ‘N Sync, Britney Spears and the Backstreet Boys.

But the price – while slightly short of the expected $3 billion tag – is high, particularly as skepticism grows over Jive’s ability to repeat its past success.

BMG parent Bertelsmann will finance the deal with a combination of cash reserves and existing lines of credit, though the company didn’t specify in what proportions. Privately held Bertelsmann has been lauded in the past as one of the few media giants that has been able to keep its debt levels under control as rivals went deeply into the red with aggressive acquisitions.


One asset that doesn’t come with the purchase price is Calder himself. The revered executive, who started Zomba more than 30 years ago, will resign his post, although he will remain in an unspecified advisory role for the BMG brass.

Calder’s No. 2, well-respected Jive president Barry Weiss, is remaining with the company under the new BMG regime – though it’s unclear how long he will stay in the fold.

Contrary to broad speculation in recent months, sources inside BMG say it’s unlikely Zomba will be combined with another label within the German-owned major. Reports had circulated that BMG would merge Jive’s roster with either RCA or Arista after the deal was done.

Jive countered some of that naysaying with a strong bow for “Justified,” the solo debut by ‘N Sync alum Justin Timberlake, earlier this month. It debuted at second place in the album charts with just under 440,000 units sold, although sales tumbled the following week.


BMG won’t reveal its plans for the structure of the newly absorbed Zomba, which in addition to Jive includes sister labels Silvertone, Volcano and Verity and a formidable library of music-publishing assets. However, some staff cuts and consolidations are expected.

“This acquisition comes at a time of renewed stability and success at BMG,” Bertelsmann CEO Gunter Thielen said. “We expect that Zomba, combined with BMG, will further elevate Bertelsmann’s stature in the worldwide music industry.”

It’s been a big month for strategic shifts at BMG. Last week, the major bought out the 50% of J Records it didn’t own from founder Clive Davis. J was added to BMG’s RCA Music Group division, and Davis, who had been ousted from the helm of Arista three years earlier, was installed to run the unit.

Separately, the Backstreet Boys are suing Zomba for breach of contract, alleging the company dragged its feet on releasing the group’s latest record, costing the Boys a $5 million contractual advance and hampering their careers. The suit was filed Monday in U.S. District Court in Manhattan.

The Backstreeters are seeking $75 million in damages, termination of their recording deal and an injunction against further interference from the label.

The group alleges that Zomba, knowing the $5 million advance was contingent upon delivery of a fourth album by April 30 of this year, delayed approval of new songs for the record and chose instead to focus on a solo project by group member Nick Carter.

The complaint notes the solo recording made Carter unavailable for the completion of the Backstreet album – which put the group in violation of another contract term that required the participation of all five members on a group record.

The delay on the record also prevented the group from going out on tour and selling merchandise to support the recording – two significant sources of revenue for the band that are not shared with the record label, the suit claims.

“Such touring activities are often an artist’s best, if not only, way to make a sustainable living in the music industry,” according to the complaint. “In the case of the Backstreet Boys, a single tour can be expected to generate tens of millions of dollars in net revenues” for the group.

The Boys’ last album for Zomba, 2000’s “Black and Blue,” sold 1.6 million copies in its first week of release; it eventually was certified eight times platinum. Released in October, Nick Carter’s solo record has sold 106,000 units.

A Zomba representative declined to comment on the suit, citing company policy.

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