BMG Rights Management will be generating revenues of around €10 million ($14.3 million) in the first year in business, according to Thomas Rabe, CFO at Bertelsmann AG, in an interview with Billboard.biz.

"As there is an accounting cycle of between 12 and 15 months in the publishing sector and we are maintaining our books on a cash basis, there will be a delay before the business which we are now transacting and the contracts which we are now signing show up in our revenues," says Rabe. Bertelsmann owns 49% in the joint venture and investor KKR owns 51%.

Rabe explained the reasoning behind the transaction with investor KKR. "With KKR's equity resources, BMG Rights Management is evolving into a global music services provider," he says, adding that the partnership with KKR offered Bertelsmann scope for making use of opportunities for acquisitions on favorable terms. "We consider ourselves to be well positioned. This is underscored by our first acquisition with the catalogue of Crosstown, which will substantially reinforce our position in the United States."

Although KKR holds the 51% of the company's capital, most of the management team at BMG Rights Management comes from Bertelsmann. "I'm the chairman of the supervisory board and believe that Bertelsmann's influence is and will remain significant," says Rabe. "After a few years, Bertelsmann will have the option of acquiring this business by buying KKR's stake. By forging this partnership with KKR we are able to establish this new business more quickly, create value and then make a decision later on as to whether we want to take over all of the business or not."

Bertelsmann CEO Hartmut Ostrowski added: "We have seen that the market is calling for a modern form of managing music rights in the form of bespoke services for artists who want to keep control of their own careers. Our new company BMG Rights Management has been offering precisely such services for just under one year now, during which it has met with enormous interest."

When BMG Rights Management started business in October 2008 with managing director Hartwig Masuch, its rights catalog consisted of about 200 artists. Since then, another 100 contracts with songwriters and other rights owners have been signed, including 2Raumwohnung, Peter Fox, Nena, Sasha, A-ha, Jim Beanz and Toby Gad.

Bertelsmann's consolidated revenues from continuing activities came to €7.2 billion ($10.3 billion) in the first half of the year, down from €7.7 billion ($11 biilion) in the same period a year earlier, a decline of 6.8%. Operating EBIT earnings declined to €475 million ($679.3 million) for the first half of 2009, compared to €685 million ($979.8 million) for the first half of 2008.

A consolidated loss of €333 million ($476.3 million) was sustained in the same period, compared to a profit of €372 million ($532.1 million) in the first half of 2008.

To date, 3,700 employees have been laid off out of a total of 107,154, with management refusing to exclude further staff cuts.

"This year, we want to achieve savings of over €900 million ($1.3 billion)," Ostrowski explains. "We are resolutely countering the decline in advertising related revenues. The top priority at this stage is to stabilize Bertelsmann's existing businesses, preserve our liquidity and safeguard our operating result. In this way, we will continue to develop our company and create the conditions for future growth."

Bertelsmann is an international media company encompassing television (RTL Group), book publishing (Random House), magazine publishing (Gruner + Jahr), media services (Arvato), and media clubs (Direct Group) in more than 50 countries.