Sony Music Entertainment (SME) is a US-based wholly owned subsidiary and global recorded music arm of Sony Corporation of America (SCA). SME is the second-largest record label in the world behind Universal Music Group (UMG). It has a stable of US labels, among them are flagship Columbia, Epic, and RCA; country labels Arista Nashville, Columbia Nashville, and RCA Records Nashville; Latin label Sony Music Latin; Christian/gospel labels Provident Label Group and Verity Records; and classical label Sony Masterworks. SME's artist roster includes such international superstars as Alicia Keys, Carrie Underwood, Ke$ha, and Kenny Chesney.
SME has international offices around the world. In addition to its music labels, it engages in independent distribution and artist development through division RED Distribution. It also produces and maintains a formidable catalog of historic reissues through catalog division Legacy Recordings. Legacy's thousands of digitally remastered archival titles cover all genres, from rock and jazz to Broadway and ethnic.
As a major music label, SME's strategy first and foremost is to discover and bid for rising star artists and churn out hits. However, labels are facing ongoing industry challenges brought on by the digital age. For one, labels are experiencing eroding CD sales due to the rise in digital downloading. Artists and their production companies are also increasingly filing lawsuits against labels over royalties for song downloads, claiming that song downloads should be considered a license (which carries a higher royalty rate) instead of a physical sale. SME itself settled an $8 million class action lawsuit with The Allman Brothers, Cheap Trick, and The Youngbloods in 2012 for increased royalties.
In mid-2011 music industry veteran and former Universal Music Group (UMG) head Doug Morris became the new CEO of SME, putting him head-to-head with former protégé Lucian Grainger, now UMG's chairman. Since coming onboard, Morris undertook a restructuring that involved replacing top executives in SME's international division and streamlining the label structure, which resulted in dozens of layoffs and the closing of several labels, including Jive and Arista. He also hired longtime Universal executive Antonio "L.A." Reid to revamp the sluggish Epic Records.
Sony Music Entertainment's ultimate parent Sony Corporation combined its global recorded music business, excluding its Japan-based recorded music business SMEJ, with the worldwide recorded music business of Germany's Bertelsmann in 2004, forming a 50/50 joint venture called SONY BMG. In 2008 Sony Corporation acquired Bertelsmann's 50% interest in SONY BMG, and the following year SONY BMG changed its name to Sony Music Entertainment (SME).