Zomba, Bmg Form Australia Pact Strategic Service Agreement Prompts Wider Industry Speculation
By CHRISTIE ELIEZER
Saturday, September 15 2001
Saturday, September 15 2001
Published on AllBusiness.com
In a move to boost its retail presence, Zomba Records Australia has entered a strategic service agreement with BMG Records Australia, effective Sept. 1. BMG's sales team will provide on-ground sales and merchandising support for Zomba, while Zomba's team will focus on retail marketing and national and key account management. Zomba has created the new position of national retail manager and hired two new account managers, reporting to Zomba director of sales Will Heine, to coordinate with BMG.
Zomba is already distributed in Australia by BMG through the latter's co-venture with Festival Mushroom, BFM. But this latest agreement will be viewed with interest by all those looking for "bigger picture" clues. German-owned BMG has minority stakes in Zomba's record and publishing operations, and there is considerable industry speculation about how Zomba principal Clive Calder will position his company worldwide—in particular, its U.S. distribution, currently handled by BMG—in the future, including whether BMG will buy out Zomba or merge with it in some other architecture.
For his part, Zomba International Record Group managing director Stuart Watson only says that the Australian move is designed to "take the way we service the local market to an even higher level," based on the firm's U.S. and U.K. sales models.
Gavin Ward, managing director of the Leading Edge, a group of 210 independent music stores with a combined 13% market share, says, "Independent music and developing acts are very much the ideal for our stores. The problem a company like Zomba faces is that as its repertoire grows, it physically does not have its feet on the ground to get inside retail or regularly contact retail to keep them serviced about upcoming product. That is of concern in terms of efficiently marketing your catalog, so an agreement like this is certainly effective for them."
But Ward warns that experience shows that in such agreements, the major label tends to show more passion toward its own product. Ed St. John, managing director of BMG Australia, does not see a problem: "We are absolutely delighted to be entering into this strategic agreement with Zomba, particularly at a time when both labels are moving into the highly competitive Christmas sales period, with a brace of incredibly strong new albums. In combining the strengths of these two rosters at a retail level, we won't just be more efficient: We'll be downright unbeatable."
Zomba's Australian GM Paul Paoliello emphasizes the move is not a cost-cutting exercise. "We recognize that Zomba cannot compete head-to-head with the majors at retail level, so we are getting smarter and quicker at adapting to the evolving retail environment. We will focus our strengths on improved retail marketing whilst utilizing BMG's muscle to achieve greater physical
Zomba is already distributed in Australia by BMG through the latter's co-venture with Festival Mushroom, BFM. But this latest agreement will be viewed with interest by all those looking for "bigger picture" clues. German-owned BMG has minority stakes in Zomba's record and publishing operations, and there is considerable industry speculation about how Zomba principal Clive Calder will position his company worldwide—in particular, its U.S. distribution, currently handled by BMG—in the future, including whether BMG will buy out Zomba or merge with it in some other architecture.
For his part, Zomba International Record Group managing director Stuart Watson only says that the Australian move is designed to "take the way we service the local market to an even higher level," based on the firm's U.S. and U.K. sales models.
Gavin Ward, managing director of the Leading Edge, a group of 210 independent music stores with a combined 13% market share, says, "Independent music and developing acts are very much the ideal for our stores. The problem a company like Zomba faces is that as its repertoire grows, it physically does not have its feet on the ground to get inside retail or regularly contact retail to keep them serviced about upcoming product. That is of concern in terms of efficiently marketing your catalog, so an agreement like this is certainly effective for them."
But Ward warns that experience shows that in such agreements, the major label tends to show more passion toward its own product. Ed St. John, managing director of BMG Australia, does not see a problem: "We are absolutely delighted to be entering into this strategic agreement with Zomba, particularly at a time when both labels are moving into the highly competitive Christmas sales period, with a brace of incredibly strong new albums. In combining the strengths of these two rosters at a retail level, we won't just be more efficient: We'll be downright unbeatable."
Zomba's Australian GM Paul Paoliello emphasizes the move is not a cost-cutting exercise. "We recognize that Zomba cannot compete head-to-head with the majors at retail level, so we are getting smarter and quicker at adapting to the evolving retail environment. We will focus our strengths on improved retail marketing whilst utilizing BMG's muscle to achieve greater physical