SONY FACES REGULATORY CONCERNS IN MOVE TO TAKE OVER EMI MUSIC PUBLISHING
Brussels, 14 August 2018
Independent music companies have made a pre-emptive strike to oppose Sony’s attempt to gain sole control of EMI Music Publishing. IMPALA confirms today that it has lodged concerns with the European Commission about the transaction, which it describes as “seismic’.
Sony’s move would increase its share of EMI to 100%, after confirmation that Sony has also bought out the shares of Michael Jackson’s estate. That would almost double the number of songs it controls, from 2.16m to 4.21m compositions. Combine that with Sony Music’s huge recordings catalogue and Sony would be the biggest and most formidable music company in the world.
When Sony became a shareholder in the consortium structure which acquired EMI Music Publishing in 2012, the European Commission said Sony would control too much music and insisted on divestments. It only approved the transaction on the basis that EMI would be run separately and would not be combined with Sony’s own publishing or recording operations. This was reconfirmed in 2016, when the Commission allowed Sony to buy out the proportion of Sony/ATV that it did not already own.
This deal would remove those safeguards. Helen Smith, Executive Chair of IMPALA commented: “It cannot be overemphasised that this is completely different to an ordinary change from joint to sole control. It’s like seeking to merge two majors. That would never be allowed and neither should this”. Sony’s latest financial results confirm that “EMI will become a wholly-owned subsidiary of Sony.”
One of the key areas of investigation will be the online market, where more concentration is likely to cause competition concerns. Sony’s position as an indispensable trading partner for online services would be significantly reinforced. It would have immense bargaining power to leverage both publishing and recorded music markets, which it can now exercise without the constraint of its current consortium partners.
If permitted, this transaction would also harm collecting societies, songwriters and composers, and consumers who would face higher charges for music services.
“No music company globally would hold so much power. Sony would be able to dictate terms to online services, dominate playlists, control collecting societies and capture all key routes to market, at the expense of online services, competitors, authors, and consumers. This would be seismic.” said Smith.
The European Commission will assess the proposed transaction once Sony submits its formal notification. Competitors and other market participants will receive detailed questionnaires to answer. The Commission will then decide whether the transaction would lead to a significant impediment to effective competition and if so, what it should do.
Helen Smith concluded: “Our view is that the transaction has to be blocked. EMI would have a better future as a stand-alone operation or combined with another smaller music company to make a more effective competitor to the majors. That would be the best outcome not only for competition but also for cultural diversity and consumer choice.”
IMPALA was established in April 2000 to represent European independent music companies operating in both the recorded music and music publishing businesses. One of IMPALA’s missions is to keep the music market as open and competitive as possible and it was instrumental in securing a key vote on copyright and platforms (link to add) in the European Parliament recently. IMPALA has an impressive record in competition cases in the music sector. The first EMI/Warner merger was withdrawn in 2001 following objections from the EU after IMPALA intervened, in its first year of existence. It also won a landmark judgment in 2006 in the Sony/BMG case, and when Sony acquired 30% of EMI publishing in 2012 (link to add), it was at the cost of significant divestments. The biggest set of remedies proportionately ever in a merger case was secured later that year, when UMG was forced to sell two thirds of EMI records and had to accept ten years of scrutiny over the terms of its digital deals. When WMG bought Parlophone in 2013 (link to add), IMPALA secured a hefty divestments package (link to add) for its members. On top of mergers, IMPALA has also been involved in other anti-trust cases involving the music sector, such as the abuse complaint against YouTube in 2014 (link to add) and the call for regulating unfair business practices by large online players. See the organisation’s other key achievements in IMPALA’s milestones.
IMPALA – Independent Music Companies Association
Coudenberg 70, 1000, Brussels, BELGIUM
+32 2 503 31 38