COMPETITION
Recorded music

 

UMG have been given outline approval by EC and US regulators to buy up EMI’s recorded music division – but the major will have to divest a number of key EMI catalogues to meet competition requirements in Europe. The same day the Federal Trade Commission approved the $1.9 billion deal without conditions, Japan, Australia, New Zealand and Canada had already approved the sale.  Among the EMI assets to be sold are the Chrysalis catalogue (Blondie, The Ramones, Spandau Ballet, Jethro Tull and Split Endz), Mute Records (home to Depeche Mode, Moby, Yeasayer and Nick Cave & The Bad Seeds) and Parlophone catalogues ( Coldplay, David Guetta, Lilly Allen, Tinie Tempah, Blur, Gorillaz, Kylie Minogue, Pink Floyd, Cliff Richard, David Bowie, Tina Turner and Duran Duran) but excluding the Beatles and  Robbie Williams. UMG will also have to sell the EMI Classics and Virgin Classics divisions and the divestment package also includes Coop, a label licensing business selling artists such as Mumford and Sons, Garbage and Two Door Cinema Club. In addition, Universal committed to selling EMI’s 50% stake in the popular Now! That’s What I Call Music compilation joint venture and to continue licensing its repertoire for that compilation in the next ten years. On the Universal side, Sanctuary, Co-op Music, King Island Roxystar and MPS Records will all be sold, as will the UMG’s stake in Jazzland.

It is thought the disposals could total $450 million and it seems EC regulators also want at least two of the divested EMI catalogues to go to a single buyer, to create another substantial player in the recorded music sector. Both Warners and BMG are rumoured to be interested.

A number of commentators, in particular independent labels, say that the move will give UMG unassailable market dominance alongside Sony, who since purchasing EMI’s music publishing division, have a 30% plus market share in the business of songs. It is expected UMG will have a 38% plus share of the global market in recorded music and many fear that the two majors will use market dominance to either prioritise their own services such as Vevo, or insist on large upfront payments or equity stakes in new digital start-ups which want to use music, as it did with Spotify. UMG own 4% of Spotify, EMI 1.9% and Sony 5.8%, and Sony and UMG jointly own Vevo with the Abu Dhabi investment company.  Universal committed not to include Most Favoured Nation (MFN) clauses in its favour in any new or renegotiated contract with digital customers in the EEA for ten years

EU competition commissioner Joaquin Almunia  said that “the very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits” and said the divestitures meant that the combined major labels would have a European Union market share of less than 40 per cent, the E.U.’s standard limit on corporate dominance adding “Competition in the music business is crucial to preserve choice, cultural diversity and innovation,” and “In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music.” Pan-European indie labels trade body IMPALA did not agree, and said it would consider its options once the EC’s full decision was published. Immediately after the EC approval, EMI chief executive officer Roger Faxon and chief financial officer Ruth Prior announced their decision to step down.

The FTC approved the deal without concessions saying “Although [we] did not conclude that a remedy was needed to protect competition in the United States, we note that the remedy obtained by the European Commission to address the different market conditions in Europe will reduce concentration in the market in the United States as well”.

In a separate matter, Almunia also put Google on notice that the EC was running out of patience in efforts to settle the matter of whether the Internet giant’s search engine favoured its own web offerings to to detriment of competitors. Google have been negotiating a settlement but Almunia has now warned that the EC may proceed with formal charges which if successful could result in massive fines for Google – as much as 10% of its annual income – last year $38 billion. Jon Leibowitz, chair of the FTC, has also said that his agency would decide on whether or not to bring legal action against Google over the same anti-trust concerns by the end of the year.

http://www.dmwmedia.com/news/2012/09/21/eu-considered-digital-innovation-in-approving-emiuniversal-deal and http://www.the1709blog.blogspot.co.uk/2012/09/the-thorny-issue-of-competition-in.html