Categories Earnings, Technology

Sony jacks up stake in EMI to become largest music publisher

In a deal that augments its fast-growing entertainment portfolio, Sony Corp. (SNE) has added to its fold an array of popular labels including songs by singers like Alicia Keys and Kanye West, spending around $2 billion. The Japanese multinational conglomerate has agreed to buy 60% ownership in UK-based music publishing company EMI Music, to become the largest music publisher in the globe.

By acquiring the majority interest in EMI from Middle East-based investment firm Mubadala, Sony is raising its holding in that company to nearly 90%. The deal is expected to be a major milestone in Sony’s transition from a hardware company to a content provider, with focus on subscription-based streaming services.

This deal comes at a time when the Tokyo-based electronics giant is making significant progress in recovering from the deep crisis that crippled its financial position a few years ago. With more than two million original songs in its music archive, EMI is the second largest publisher of songs and holds copyrights to the labels of popular artists like Pharrell Williams, Drake and Queen.

By acquiring a majority interest in EMI, Sony is raising its holding in that company to nearly 90%

Hinting at more deals in future aimed at ramping up its assets in the entertainment sector, Sony CEO Kenichiro Yoshida stated, “the music business has enjoyed a resurgence over the past couple of years, driven largely by the rise of paid subscription-based streaming services.”

This investment, the first major deal under Yoshida, is expected to strengthen Sony’s position to compete with its rivals in the music streaming sector such as Apple (AAPL). Sony, which owns a minority stake in Spotify (SPOT), signed a $185-millon agreement to buy a stake in Peanuts this month, in line with its expansion strategy.

Sony’s recovery has been marked by inconsistencies in the recent past. In the fourth quarter, the company recorded a bigger than expected loss, reversing the positive momentum of the preceding quarters, casting doubts over the viability of its turnaround strategy.

In a sign that investors are skeptical about the deal, amidst concerns that Sony is paying too much for EMI, the company’s shares lost nearly 2% in early trading on the New York Stock Exchange soon after the announcement.

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