The independent music community has vowed to fight on after European regulators approved Sony ATV’s acquisition of EMI Music Publishing, a deal which the indies say “sends an alarming message” to all small-and-medium sized businesses.
Sony ATV can now take sole control and ownership of EMI Music Publishing after the European Commission last Friday gave its consent, without conditions.
Impala, the pan-European independent music companies’ trade association, had rigorously opposed the proposed transaction, the result of which would create a mega-publisher with 4.21 million compositions, a huge pool of writers, and the ability to combine recordings and publishing. It would “control more music than any other player in the sector,” the Brussels-based lobby body warned.
For more than a year, Sony ATV has been circling the remaining piece of EMI Music it didn’t already own. And the music giant was willing to put a serious offer on the table. As previously reported Sony Corporation will pay about US$2.3 billion for an additional chunk of EMI Music Publishing, valuing the company at US$4.75 billion, including debt.
Since 2012, EMI Music Publishing has been jointly owned and controlled by Sony Corporation of America and Mubadala Investment Company PJSC, an investment fund based in the United Arab Emirates. Sony Corp. signed a “legally binding” memorandum of understanding earlier this year to acquire a 60 percent share in the publisher, which triggered a regulatory probe.
Now, authorities have approved the deal, under the EU Merger Regulation. The European Union issued a statement to announce its phase I investigation into the transaction found that “no competition concerns” were raised, “in particular as it will not increase Sony’s market power vis-à-vis online platforms.”
At the very least, Impala had called for Sony to be required to spin-off some of its assets, which regulators had agreed to on earlier mergers. “This goes against the regulator’s own precedents,” notes Helen Smith, Impala’s executive chair. “In 2012, it ruled that divestments were required for Sony to become a minority shareholder. Now that Sony is acquiring 100% control of EMI, it is being given unconditional approval. This is inconsistent and simply doesn’t stack up. It is a poor advert for European merger control and sends an alarming message to independent businesses in all sectors, not just music.”
The deal is “bad news for the music sector and the digital single market,” Smith adds. “Sony will have a near monopoly over the charts and the whole music value chain will lose out as a result. Songwriters, composers, independent labels and publishers, digital services, and of course music fans, will all be worse off. This decision has dealt a significant blow to innovation and cultural diversity in Europe.”
Sources tell Billboard the deal doesn’t need regulatory approval in the U.S.
Impala will review the decision “very carefully,” Smith continues. “And we expect others will too. This is simply too important to let go. It undermines eighteen years of robust merger control in the music sector.”
Speaking after the Commission’s bombshell, Smith explained: “The outcome is perplexing. It sends a message that a move from 4 to 3 in a market will simply be approved if done in stages rather than in one transaction. It could be seen as gaming the system and raises questions about whether we need a review of how European merger control rules apply to cases of joint to sole control.”
Since its inauguration in 2000, Impala has lobbied hard on a range of mergers and acquisitions, and enjoyed some success. The trade body fought the Universal-EMI deal, which was approved with Universal ordered to divest two-thirds of EMI’s labels and respect 10 year behavioural undertakings in what was the biggest set of merger remedies ever secured.
Impala also raised the alarm in 2012 when the Commission okayed the acquisition of EMI Publishing by a consortium including Sony/ATV and, again in 2016, when the Commission approved Sony’s shift from joint to sole control of Sony/ATV.
The full non-confidential version of the EU’s decision will be made available in the weeks ahead.