Sony BMG May Swap Roles of 2 Executives

The nation’s second-largest music company, Sony BMG, is close to resolving a four-month leadership dispute by swapping the roles of the company’s top executives, sources said Tuesday.

Under the agreement, which is still being negotiated, Chief Executive Andrew Lack would become Sony BMG’s nonexecutive chairman, and Chairman Rolf Schmidt-Holtz would assume the CEO post.

The swap would end a struggle between German media firm Bertelsmann and Japanese electronics giant Sony over the leadership of Sony BMG, which was formed as a joint venture between the two companies in 2004.

All sources requested anonymity citing the delicacy of ongoing discussions. Representatives at Sony BMG and Bertelsmann declined to comment. A Sony spokeswoman did not return calls seeking comment.

“This is a doable solution,” one BMG executive said. “This will restore some calm to the company.”

Still unresolved are questions regarding Lack’s responsibilities and who will become chief operating officer, a role that oversees much of the company’s day-to-day operations, people familiar with the discussions said.

The swap would represent a mixed victory for Lack, who is credited with driving the Sony BMG merger. Insiders say the power struggle has exacerbated the rifts between BMG and Sony Music, which remain separate divisions despite sharing a corporate parent.

The swap also means that Lack’s focus would probably shift away from operational oversight of Sony BMG to piracy, intellectual property legislation and other larger strategic issues.

But Lack’s continued role at the company is a signal of his support within Sony Corp., executives said, and undermines Bertelsmann’s contentions that the company has not been well managed.

Sony reported last month that Sony BMG’s profit in the quarter that ended Dec. 31 was $178 million, up from $157 million a year earlier. Sales at the music company were $1.5 billion, down less than 1%.

Sony BMG’s top artists include Usher, Gretchen Wilson and Alicia Keys.

The leadership dispute began last fall, when Bertelsmann directors informed Sony Chief Executive Howard Stringer that they opposed renewing Lack’s contract when it expired in March. A former NBC executive, Lack took over Sony Music in 2002.

Under the terms of the joint venture, Sony has the right to name the company’s chief executive until 2009. However, Bertelsmann eventually has the right to fire the CEO.

Some attributed Bertelsmann’s withdrawal of support as a tactic intended to ensure that a BMG-affiliated executive filled the post previously held by Michael Smellie, a BMG alum who in July announced plans to retire as Sony BMG’s chief operating officer.

Stringer soon thereafter issued a statement of support, saying that Lack “is exceptionally well-suited to manage the company in this challenging and ever-changing environment.”

Some hint of the company’s internal tensions came last week when Schmidt-Holtz told a group of students at the London School of Economics that “if you have the wrong CEO at the top of a company, you can destroy it in only two years,” according to a Reuters news report.

Schmidt-Holtz, however, was careful to emphasize that he was speaking in general terms, and not about Lack.