When David Bowie moved to the divided city of Berlin in 1976, he joined 2 million inhabitants of what was effectively an island surrounded by the communist German Democratic Republic. This particular contrast between east and west left such an impression on Bowie that it inspired his classic "Berlin trilogy" of albums, largely recorded there with Brian Eno: "Low," "Heroes" and "Lodger."

That perennial appeal to artists-the likes of Iggy Pop and Nick Cave have also lived in the city-strengthened even more on Nov. 9, 1989, with the fall of the Berlin Wall that had kept the two parts of the city separate for more than 40 years. This was followed by the reunification of Germany in October 1990.

With the opening of the borders, Berlin -- named as one of Billboard's new global hot spots for 2007 (Billboard, Jan. 6) -- was inundated with thousands of creative people. Today, the reunified capital of Germany has more than 3.4 million citizens and has become a multicultural melting pot and a magnet for the music industry. The city is home to hundreds of labels specializing in dance, electronic and hip-hop, and there is now also a burgeoning rock and alternative rock scene, while the major labels have released albums by more than 40 Berlin acts in the past 10 years.

Hartwig Masuch, managing director of Berlin-based BMG Music Publishing, explains the city's appeal: "Berlin's cultural scene is so radical and swift-paced that it is breathtaking to see how strong the pressure on the creative music boiler becomes from time to time, causing it to explode and release entirely new musical experiences."

Berlin has evolved into a mecca for these "new musical experiences" for many musicians from all around the world. A substantial number of DJs and bands move to Berlin to be inspired by the city's cultural diversity, with 14% of Berlin's population hailing from outside Germany, according to Harald Wolf, senator for the economy, labor and women in Berlin.

"Contrast is Berlin's trump card," says Gerd Gebhardt, executive producer of the prestigious Echo Awards, which moved to Berlin in 2001.

George Glueck, a publisher/producer with his own Berlin label X-Cell, agrees. "The city of Berlin is full of energy," he says. "It's a magnet for the most unique individuals with an urge to find a place to express their creativity in an atmosphere of tolerance. There is no alternative for me than to be based in Berlin, as this is where I find inspiration for my work."

Even those located elsewhere are aware of its appeal. Peter Ende, Hamburg-based president/CEO of EMI Music Publishing Continental Europe, says, "Berlin is a courageous city which experiments and constantly produces new and inspiring things, particularly in the music area."

Ina Kessler, senior manager of business development at Berlin Partner, is trying to lure new music companies to the city. Berlin Partner is a public/private partnership that supports business startups in the city and assists Berlin companies in all aspects of foreign trade. Since 2002, it has encouraged leading companies to relocate to Berlin, including Universal Music, KKT Tourservice, IFPI Germany and indie association VUT, which all moved from Hamburg; MTV Four Music Production and eBay (from Cologne), Bosworth Music Publishing (Frechen) and Networks (Munich). Kessler says, "We help customers in their search for a suitable location, provide finance and funding programs and assist with staff recruiting and the establishment of contacts with key political and administrative bodies."

Commenting on her decision to move her company to Berlin, MTV Central and Emerging Markets GM Catherine Mühlemann says, "Berlin is Germany's music capital and as such is not only MTV's home, but has also been an additional site for Viva [the first German music channel, bought by MTV parent Viacom in 2004] since 2005. With the addition of children's broadcaster Nickelodeon in September 2005, MTV Networks is benefiting to an extraordinary extent from the creative environment of the city."

The only major with headquarters in Berlin is Universal Music, which moved from Hamburg in 2002. It lost 40% of its staff in the process, with many unwilling to relocate. As a result, the company was forced to recruit locally and was thus able to capture the special atmosphere of the city very quickly. Universal's market share of German recorded-music sales has increased from 28.4% in 2002 to 33% in 2006. The company's A&R has a local focus too, with 24 Berlin acts on its roster, ranging from internationally successful hard rock band Rammstein and hip-hop act Bushido to dance specialist Paul Van Dyk and current Pan-European pop phenomenon Tokio Hotel.

Frank Briegmann, Universal Music Germany president/CEO since 2004, considers the multicultural music scene as offering the perfect base for finding German repertoire. "Berlin is definitely the leading German music center and where the key trends are being forged," he says. "The creative multicultural setting and the dilapidated, unfinished feeling are what constitute Berlin's unique appeal for music. If you live in Berlin, you not only know what makes young people tick but also what new music trends are being created."
Alongside Universal, Sony BMG and EMI have smaller offices in Berlin. They are joined by such independent labels as !K7, Bungalow, Jack White Productions, Kitty-Yo and Ministry of Sound.

"The main reason for the success of Berlin musicians is the consistently creative environment," says Stefanie Marcus, managing director of Berlin indie Traumton Records, which features many Berlin acts, from funk band Beat 'N Blow to jazz threesome the Carsten Daerr Trio. "The music majors do not pose a threat for the many smaller labels in the city. We coexist well without encroaching on each other's territory."

IFPI Germany also moved to Berlin in 2003. President Michael Haentjes, also CEO of Edel Music, says, "We have to be where politics are being made and where the laws of the future are being written." Berlin was made the capital of the reunited Germany in 1991 and the German parliament, the Bundestag, moved there in 1999.

Berlin is also one of Europe's key dance music centers, with a multifaceted club culture focusing on techno, electro and hip-hop. It is no coincidence that the world-famous Love Parade street party arose in Berlin in 1989, shortly before the wall came down. It now attracts millions of dance, house and electro fans from all around the world each year. At this stage, it is not clear whether the Love Parade will happen in 2007 since key sponsors have not yet been found.
Olaf Kretschmar, manager of Oxymoron, one of 250 clubs in the city, says the beat will go on regardless. "The music city reinvents itself each day," he says. "The clubs are homes away from home for an urban scene aged between 18 and 40."

Dr. Harald Heker, chairman of the management board of collecting society GEMA, which has offices in Munich and Berlin, says that music from Berlin exerts a strong influence throughout Europe. "The fact that GEMA was founded in Berlin more than 100 years ago as an association to represent the interest of music authors in Germany is no coincidence," he says. "GEMA has its offices at the very heart of the music scene."

Wolf says the Berlin music industry generated €1.5 billion ($1.98 billion) in revenue in 2006, a 72% increase since 1998. The music industry-which comprises record companies, publishers, studios, concert promoters and music retailers-employs more than 6,200 people. Between 1991 and 2004, the Berlin government provided investment grants in excess of €20 million ($26.4 million) to encourage the establishment of new music companies. "With its above-average growth potential, the music industry is one of the top sectors of the future for Berlin," Wolf says.

Berlin houses more than 100 music publishers. In addition to such majors as BMG Music Publishing, Universal Publishing and Sony ATV, there are midsize operators like Budde, Meisel and Bosworth Publishing. Sony ATV managing director Patrick Strauch says the Berlin scene is characterized by its "freedom and tolerance." "There is no 'Berlin sound' as everyone can find his or her own niche," he says. "And each niche in Berlin is still bigger than the entire music scene of other German cities."

The concert scene in Berlin is one of the most diverse in Europe, according to Peter Schwenkow, Berlin-based president/CEO of top German promoter DEAG AG, which claims to account for 30% of the revenue generated by live music in Berlin. He says that up to 2,000 pop concerts are offered each year and, while ticket prices are 10% below nationwide levels, the city remains an essential stop for top international stars.

Berlin has more than 250 concert venues, from small, 300-capacity clubs like Knaack-Club and Volksbühne to arenas like Wuhlheide (18,000 people) and Waldbühne (22,000).

Encouraged by such diversity, U.S. company Anschutz Entertainment Group is investing €500 million ($659 million) in a new 16,000-capacity auditorium to be known as O2-World when it opens in September. AEG will co-manage the venue with DEAG.

Berlin mayor Klaus Wowereit sums up the city's unique appeal. "With its energy, vibrancy and flair, Berlin attracts young and creative minds from around the globe," he says. "Trends that originate here end up traveling around the world, and the world in turn comes back to Berlin."