COMPETITION
Record labels


Whilst numerous music industry players have hit out at Universal’s plans to buy the EMI record companies – including Warners’ former chief Edgar Bronfman, Beggars Banquet chief Martin Mills and legendary producer George Martin (alongside negative comments from AIM and IMPALA), Jim Beach, manager of Queen, a band signed for most of their career to an EMI label before moving over to Universal once Terra Firma acquired the British label, has written a letter to the Times seemingly supporting a merger that will give Universal something approaching 50% of the recorded music market saying “Today’s music business is very different to that of 40 years ago, when the band I represent, Queen, began its career with EMI Records. Then the company was a hugely influential creative force in the UK and overseas. It gave us extraordinary music across virtually every genre, and its artists shaped the tastes of more than one generation”, “But”, he continued, “the latter-day EMI Records under private equity proved to be a very different place. Investment was slashed to the detriment of the artists, Queen among them, and we were not alone in jumping ship. I look forward to when EMI Records will again be owned by a music company as there are still great artists and executives there who need more creative people at the top”.

What is true is that the Terra Firma ownership was a disaster for EMI and music, but let’s not forget that Universal is owned by French multinational mass media and telecommunications company Vivendi.  Moreover,  the recorded music industry is a significantly different business than it was ten years ago – and whatever your views are on digital piracy – it cannot be ignored – and nor can the rise of new independent distribution systems such as Apple’s iTunes, and streaming services such as Spotify.  But whether that justifies the creation of a dominant player with a possible 50% market share is debatable.

Jim Beach’s intervention isn’t the first support for the merger – two US talent unions, the Screen Actors Guild/American federation of Film and Television Artists, and the American Federation of Musicians, had previously offered support and a recent feature in The Tennessean quoted three players from the local US indie music community who expressed indifference or even a positive attitude to the merger. Tom Baldrica of Average Joes Entertainment told the paper: “Whether you’ve got four majors in town or three – it’s still the same battle for us, but there’s one less Goliath”. Meanwhile David Robkin of Bigger Picture Group said: “The merger might even help independent labels, which attract artists precisely because they aren’t big, mainstream companies. We’re competing not necessarily based on dollars, but based on time available and creativity and flexibility, and I think that’s something that as companies consolidate and get bigger – it actually creates opportunity for us”. Scott Borchetta of Big Machine Records remarked: “Consolidation doesn’t matter as much in a digital world. When the major labels controlled the distribution channels, it was a different deal, but now the barrier to entry is literally turning on your computer. If I continue to make great records by great artists, nobody can stop us”.

In the other camp, George Martin – a former EMI employee – recently said: “I am saddened that great companies have been swallowed up by the giants, and the domination of the recording and music publishing industry by Sony and Universal can only lead to a virtual monopoly in the European market” and Beggars chief Mills said: “We fear Universal’s acquisition of EMI. The mere fact that it controls 50% of the artists that media and retail want already gives them leverage other companies don’t have. [Adding EMI’s artists] obviously gives Universal more access, but it also gives other people less. When one party has the ability to be so dominant, it’s going to be difficult for anything outside the mainstream to come through”.

IMPALA Executive Chairman Helen Smith said in November 2011 that any merger between EMI and Universal Music would be to the detriment of the music industry and Warners then chair Edgar Bronfman said  “It’s dangerous, problematic and has to be stopped”  …. “Warner will fight it tooth and nail.” Public Knowledge, a campaigning group that lobbies on internet and intellectual property issues submitted a letter to the Federal Trade Commission arguing that an expanded Universal and Sony would be very bad news for the emerging digital music market. PK urged FTC officials to consider how the deals will “impede investment, innovation, and therefore competition” and affect “the development of music distribution and other services that ultimately benefit musicians and their fans everywhere”.

One interesting development has been in the recent claim brought by the Doobie Brothers against Warner Music – one of many claims brought by artistes now against all of the majors regarding digital royalty rates – but the Doobie Brothers allege that apart from an underpayment of royalties, the four majors have conspired together to pay all artists the lower ‘physical product’  royalty on digital revenue, because if one record company paid the higher rate it would put an obligation on the others to follow suit. Whether there is any actual evidence of collusion on this issue isn’t clear – but if proven this would be damning example of anti-trust behaviour and one which would surely alarm competition regulators both in Europe and the USA. The majors’ track record on antitrust actions is hardly wonderful with the Starr v Sony case still unresolved (harking back to the majors failed PressPlay and  MusicNet online digital retail platforms), the US CD 2002 price fixing settlement and the 2005 and 2007 payloa settlements in the USA.

Competition regulators in both the US and European Union continue to investigate Universal’s proposed EMI acquisition although the EU have now cleared Sony ATV’s participation in the consortium acquiring EMI’s music publishing division.  A committee in the US Senate will consider Universal Music’s proposed acquisition of the EMI record companies, according to the Wall Street Journal.

www.thecmuwebsite.com  and http://www.billboard.biz/bbbiz/industry/record-labels/universal-music-s-emi-acquisition-supported-1006795352.story and http://www.musiclawupdates.com/?p=4807 and more analysis  on some of the arguments both for and against the merger are here in Key to Universal-EMI decision: Has music business lost control? http://money.msn.com/business-news/article.aspx?feed=OBR&date=20120516&id=15114743