Aug. 6 (Bloomberg) -- Bertelsmann AG and Sony Corp. completed the merger of their recorded music units, creating Sony BMG, the world's second-largest music company with artists including Bruce Springsteen and OutKast.

Sony BMG Music Entertainment, based in New York, will be half owned by Bertelsmann and by Sony's American unit. The new company will hold almost a quarter of the global music market. Financial details of the transaction were not provided.

The new record company was created to cut costs and save about $350 million at a time when the $32 billion music industry faces its fifth year of recession. Sony BMG will focus on integrating the businesses, Sony Music Chief Executive Andrew Lack, who will head the new venture, said last month. Lack at the time declined to say how many jobs may go at the company.

Sony BMG is the first successful large music merger since the formation of Universal Music Group in 1998. EMI Group Plc has since 2000 tried three times to merge with a competitor.

Both Sony and BMG, which last year paid $2.75 billion to buy Zomba Music Group, have in the past few years slashed expenses and jobs at their music arms as earnings fell.

Tokyo-based Sony, the world's second-largest consumer- electronics maker, last month reported a fiscal first-quarter operating loss at its music unit. Overall, net income at Sony surged on gains its mobile-phone and movie units, while profit from electronics halved.

``The much more important thing for Sony is to be competitive in consumer electronics,'' said Makoto Kikuchi, chief financial officer of Myojo Asset Management in Tokyo. ``As long as they are competitive in the electronics segment, the content provides good synergy,'' he said. Kikuchi declined to say how much money he manages.

Music Mergers

The Bronfman family's Seagram Co. bought PolyGram NV from Royal Philips Electronics NV in 1998 and created the largest record company now known as Universal Music Group.

The industry has since lost a fifth of its value, mired by lower consumer spending on compact discs, illegal copies of CDs and unauthorized downloading of song files using the Internet.

EMI's latest attempt to buy Warner Music was rebuffed last year when Time Warner Inc. decided to sell its music arm to Edgar Bronfman Jr., the former owner of PolyGram. Universal Music, the biggest in the industry, is now owned by France's Vivendi Universal SA.

Sony Music and BMG had a combined market share of 25.1 percent last year, according to figures by the International Federation of the Phonographic Industry, an industry group.

However, the new venture Sony BMG excludes Sony's Japanese unit. Overall, that makes it the second largest record company, with a size almost as large as Universal Music, which has a share of 23.5 percent.

Following is a table of the new ranking in the music industry with names of artists and labels.

The world's four largest record companies:
1- Universal Music: owned by Vivendi Universal SA.
Artists including 50 Cent, Eminem, Luciano Pavarotti, Elton
John, Diana Krall, U2, Mariah Carey. Labels include Island Def
Jam Music, Geffen Records, Polydor, Interscope A&M Records.
2- Sony BMG: 50 percent owned by Bertelsmann and Sony Corp. of
America.
Artists include Dido, Santana, Bob Dylan, Bruce Springsteen,
Jennifer Lopez, Justin Timberlake. Labels include Arista, RCA
Records, LaFace, Columbia Records.
3- EMI: publicly traded in London.
Artists include Norah Jones, Coldplay, Robbie Williams, Chingy,
Jay-Z, Eros Ramazzotti. Labels include Capitol Music, Blue Note
records, Virgin Records, EMI Records.
4- Warner Music: owned by investors including Edgar Bronfman
Jr.
Artists include: Madonna, Brandy, Craig David, Led Zeppelin, The
Corrs, Bjork. Labels including Atlantic Records, Elektra,
Maverick, Warner Bros. Nashville.

To contact the reporter on this story: Cecile Daurat in London at at cdaurat@bloomberg.net.

Last Updated: August 6, 2004 05:18 EDT