US talent unions back UMG on EMI takeover, and Sony/ATV deal for EMI Music publishing gets the EC’s green light

May 2012

Record labels, music publishing

In a surprise move, two of the US’s biggest talent unions have come out in support of Universal’s takeover of EMI’s recorded music division on the ground that UMG would, unlike previous owners Terra Firma, actually invest in music and musicians. In a letter to the U.S. Federal Trade Commission Chairman Jon Leibowitz The American Federation of Musicians said that UMG had shown “compliance with and respect for its collective bargaining agreements has been positive when compared to its peer companies” and that “Sustaining the EMI legacy” under Universal’s ownership “would appear to benefit AMF recording musicians.” The recently merged The Screen Actors Guild and the American Federation of Television and Radio Artists said Universal has shown commitment to the music industry, investing in new artists and innovative musical genres in a separate letter saying “For EMI to be left to further drift into oblivion, or for EMI to be acquired and sold off in pieces by capital investment speculators with no appreciation for, or commitment to, artists who fuel the recording industry, would ill serve the industry,” SAG-AFTRA said.

Universal is “committed to reinvesting in EMI to create even more opportunities for new and established artists, expand the marketplace with more music and support new digital services,” the company said in an e-mailed statement in which it welcomed the unions’ support.

Citigroup, who seized back control of EMI from Terra Firma, is selling the British music group’s recorded music division to UMG and its music publishing business to a consortium led by Sony/ATV – giving UMG upwards of 40% of the recorded music market and Sony/ATV control of over 31% of the music rights market leaving Warners as a ‘mini major’. The value placed on EMI is $4.1 billion.

Warner Music Group, owned by billionaire Len Blavatnik’s Access Industries Holdings Inc., failed in its bid to buy EMI and opposes the sale to UMG and the independent labels groups AIM and IMPALA have also opposed the merger, asking both the FTC and the European Commission to investigate. Washington-based public advocacy group Public Knowledge last month urged the FTC to carefully scrutinize the transaction to see whether it hurts competition in the music industry. The Consumer Federation of America in calling for the merger of the Universal and EMI labels to be discussed on Capitol Hill by the Senate Judiciary Committee pointing to the recent Department of Justice  regulatory actions against Apple and five of the biggest book publishers over digital book price fixing in the USA California’s Attorney General Kamala Harris has reportedly started making her own inquiries into the two EMI deals, separate from the ongoing competition investigation being conducted in the US by the Federal Trade Commission. The Commerce Commission in New Zealand has invited interested parties to make submissions to its inquiry into the proposed takeover, focusing ion Universal’s claims that the independent sector in New Zealand currently enjoys a strong competitive position, the extent to which artists can now circumvent the label system, and the extent to which piracy limits the big rights owners’ power in setting prices, especially in the digital domain.

Whilst less controversial, the sale of the music publishing division to Sony/ATV could possibly result in the loss of half of all of EMI’s workforce in that division as Sony/ATV will look after the administration of the EMI catalogue and handle licensing deals, enabling significant cost savings, basically redundancies. Sony ATV boss Martin Bandier (who himself was previously CEO of EMI Music Publishing) sought to re-assure EMI staff that press speculation was ‘premature”

It is thought that the use a consortium including Sony’s partner, the Michael Jackson Estate, as well as investors that include  GSO Capital Partners, Jynwel Capital, the investment arm of the Abu Dhabi government and one time record industry man and film producer David Geffen as shareholders in the new EMI Publishing may allay competition regulators’ concerns. The EC had previously confirmed Sony/ATV had offered concessions, and whilst concerned about the dominance of the combined SonyATV/EMI in the UK with Anglo-American music, they approved the deal on the basis of the proposed sale of the Virgin-branded songs catalogue, plus the Famous UK catalogue and some key songs by prominent Anglo-American artists, which were designed to specifically deal with those EC concerns.  Although the Sony/ATV deal still needs approval in the US, and is also being investigated in Australia and Brazil, securing approval in Europe with just a one-stage investigation is a considerable step forward for the deal. Confirming the deal had been approved in Europe, the EC’s Competition Commissioner Joaquín Almunia said  “[The consortium] offered to divest valuable and attractive catalogues containing bestselling titles as well as works of successful and promising authors. I am therefore satisfied that the competitive dynamics in the online music publishing business will be maintained so as to ensure consumer choice and cultural diversity”. Meanwhile Bandier said “Having spent over seventeen years of my professional life helping to build EMI Music Publishing, today is not only an important milestone on the path to final approval, but a very special day for me, personally”.

Not everyone is happy – commenting on the EC approval IMPALA’s Executive Chair Helen Smith told reporters: “It sounds like the worst possible result for European writers and publishers, as well as anyone who needs to rely on fair terms to access music”. and see March’s MLU

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