WMG dials digital deal with Korea

Warner Music Group merges South Korean arm with SK Telecom

HONG KONG — Warner Music Group is set to merge its South Korean arm with the country’s dominant wireless operator SK Telecom to create a joint venture to sell music via mobile phones and other digital platforms.

The deal, announced by Warner topper Edgar Bronfman Jr. Wednesday in Hong Kong, is the first of its kind.

New company WS Entertainment will be a full-service operation covering signing, development and distribution of music. Bronfman described it as an entirely new business model.

“WS Entertainment will give us easily the ability to experiment with sophisticated windowing strategies, bundling new forms of content and supportive models for premium content. WS Entertainment will be a fertile incubator and laboratory for exciting developments we can’t even imagine today, but which may become the industry standard,” Bronfman said.

Deal comes as music labels such as Warner Music, the world’s fourth-largest record company, are betting the digital market’s fast growth will outpace the lost revenue in traditional CD sales.

Under the deal, Warner Music will give a 49% stake in Warner Music Korea to SK Telecom’s Seoul Records to form WS Entertainment. The pair will invest 8 billion won ($8.6 million) into the venture.

Warner Music will hold a 60% stake in WS Entertainment with SK holding 40%.

Bronfman, who ducked comment on merger negotiations with EMI Music, was the keynote speaker at Hong Kong’s first Asia-Pacific Music Matters conference.

The move highlights the growing importance of mobile phones as a platform for buying, storing and listening to music.

In South Korea, sales of music to mobiles far outstrip CD sales. Mobile networks are more tightly controlled by their operators than the Internet, and are much less prone to piracy.

(Wire services contributed to this report.)

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