Sony’s captain has Lack’s back

Stringer sides with music exec

NEW YORK — Sony topper Howard Stringer is sticking with his guy.

Stringer on Monday publicly supported Andrew Lack, who is facing a palace coup over his leadership of music label Sony BMG Music Entertainment.

Bertelsmann execs have informed Sony BMG that they would not support renewing Lack’s contract, the first signs of strain in a marriage that began 14 months ago to help Bertelsmann and Sony weather a painful shift in the biz forced by new technologies.

Sony BMG execs characterized the move as a negotiating ploy by Bertelsmann to gain more power within the joint venture. Bertelsmann execs say the problems run deeper. The venture is losing market share and colleagues have chafed under his management style.

But Stringer issued a statement strongly supporting the former NBC TV exec whom he chose to lead Sony Music Entertainment a little over three years ago and who engineered the joint venture with BMG.

“Andy is exceptionally well-suited to manage the company in this challenging and ever-changing environment,” Stringer said. Lack “has executed this very complicated merger between Sony Music and BMG music brilliantly.”

Bertelsmann’s strategy appears to have won at least one major concession: Sony BMG said it would move quickly to appoint an executive acceptable to Bertelsmann as Lack’s No. 2 after chief financial officer Michael Smellie departs at the end of the year.

Smellie’s departure had become a sore point with Bertelsmann chairman Rolf Schmidt-Holtz, who does not have a good working relationship with Lack and considered Smellie his eyes and ears at Sony BMG.

The departure of Smellie threw management of the joint label too far into the Sony camp, sources said. There had been some concern that Lack would not replace Smellie, or worse, appoint a Sony hand to fill the job.

But Sony BMG sources said Lack hadn’t moved quickly to replace Smellie out of a desire not to make a lame duck of the BMG exec, who is retiring to spend more time with his family in Australia.

Lack was traveling in Europe on Monday and not available for comment.

Naming rights

According to the joint venture, Stringer has the right to appoint the CEO of Sony BMG for the next five years, but Bertelsmann has to approve the pick. If Bertelsmann decides to oppose renewing Lack, Stringer can reappoint him for an interim period through 2006.

Sony BMG said Lack has met or exceeded financial goals for the company — including $400 million in cost savings in the first year when he had promised $350 million.

Lack has always been sanguine about the music biz’s immediate prospects; in July he told Variety it would be 2008 before the joint company would hit $4.5 billion in revenue, the figure the two separate companies achieved in 2003.

BMG had an unusually good year in 2004 — the year before the merger — which makes market share losses seem more severe.

Sony BMG execs said Lack should be judged after the all-important fourth quarter, when music companies do as much as 30% to 40% of their annual sales.

In the fourth quarter, BMG has a much stronger-looking slate than Sony, with new releases from Santana, Rod Stewart and the two recent “American Idol” finalists, plus a hits collection from the Eurythmics.

Sony’s slate includes a Destiny’s Child hits disc, an expanded version of Bruce Springsteen’s “Born to Run,” a blues record from John Mayer and new recordings by INXS and Neil Diamond.

Lack will be judged on the performance of both sides of the company, but Bertelsmann execs expressed concern that the value of their stake in the company is being diminished.

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