Bertelsmann changes tack on Sony BMG

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Bertelsmann is understood to have modified its demand that Andy Lack be removed as chief executive of Sony BMG, its music joint venture with Sony, the Japanese electronics manufacturer.

The German media group, which informed Sony two months ago that it would not support the renewal of Mr Lack’s contract, is now believed to be pushing for Rolf Schmidt-Holz, Sony BMG’s non-executive chairman, to be given an executive role.

Mr Lack ran Sony Music Entertainment before the merger, while Mr Schmidt-Holz ran Bertelsmann Music Group.

Bertelsmann and Sony would not comment on Thursday, and it was not clear whether the idea would be more acceptable to Sony than Bertelsmann’s initial proposal.

Sir Howard Stringer publicly defended Mr Lack when the dispute became public a month ago. However, the proposal could allow Mr Lack to stay on, at least until August 2006, when Bertelsmann has the right to terminate his contract.

Sony BMG’s board, which is evenly split between Bertelsmann and Sony representatives, meets in London on Monday, when Mr Lack is due to present his budget proposals for 2006.

However, it is not clear that the management issue will be resolved at this
meeting.

The proposal, first reported in FT Deutschland, the FT’s sister paper, could result in Mr Schmidt-Holz being made executive chairman and Mr Lack remaining as chief executive, or the two roles could be swapped.

Bertelsmann supporters have said that its concerns about Mr Lack stem from the division’s performance. At its third-quarter results this week, Bertelsmann said all its units had contributed to the rise in operating profit, with the exception of the music business.

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