EMI might have been sold, but there’s more hard work to be done…

On November 14, 2011
Emi_sold

A historic £1.2b buyout finally took place last week when Universal Music Group (who had seemingly backed out of talks) placed a final winning bid for the British music institution EMI and its recording division. But with regulatory bodies and the likes of IMPALA waiting to scrutinise the deal and its knock-on effects, is the deal well and truly done?

Anybody who has been following my posts over the past month has seen the deals go back and forth with ongoing speculation and “will they, won’t they” drama. The deal effectively moves EMI’s catalogue and assets such as Abbey Road into the ownership of Universal and French parent company Vivendi. But like all major corporate takeovers, there are still some hurdles to jump. IMPALA (the Independent Music Companies Association) had already spoken out over a large buyout and warned it would oppose any other major label’s attempts to acquire EMI. 

In a Music Week article last week, Charlotte Otter described IMPALA’s concerns and the reasons behind their strong opposition to the deal. IMPALA fear that the combination of EMI and a group such as Universal under the Vivendi flag would give an unfair market share to one label and widen the competitive gap between major labels and independents. Another side effect of the buyout could be the streamlining of departments under the Universal label, meaning potential job losses and possibly closures of some of EMI’s smaller sub-labels. IMPALA have voiced concerns about major label practices in the past, and as the article states, IMPALA have already been looking into Universal’s dealings with Live Nation, the large live events oligarch. 

IMPALA will be turning to the competition authorities to voice these concerns, but Universal stresses that the deal is not simply a move to gain power, but an effort to rescue a brand that it sees as vital to the industry itself and “breathe new life into it.” The Financial Times notes Vivendi CEO Jean-Bernard Lévy’s reminder of the Bertelsmann buyout in 2006 and his claim that this transaction would only help to create a resurgence of the great British icon. Universal CEO Lucian Grange added “We’re not bankers; we’re not private equity. Music runs through our veins” – addressing concerns surrounding EMI during its ownership by Guy Hands and his private equity firm Terra Nova. Many artists felt the corporate style of management and funding brought in under Hands’s reign led to a stifling of creativity. These issues caused artists like the Rolling Stones and Sir Paul McCartney to walk away from the label. 

These concerns are valid, and some have raised other pressing issues. James Ashton of the Evening Standard sees the greater threat to the UK’s creativity as a nation without a major music label. EMI’s talent for finding new artists and making them stars has launched many successful British acts. Now the power will lie elsewhere, with dictation coming from HQs in the USA. Again, a valid concern, but the UK has produced lots of talent without EMI. And will EMI’s directive of finding and nurturing such artists be diminished, or will its new owners demand it as part of the package they have purchased? 

One asset which the deal does not seem to threaten is Abbey Road Studios. Celebrating its 80th anniversary during the weekend of the buyout, Universal was clear to state their intentions for Abbey Road. In an article for The Independent, Grange stated:

“Abbey Road Studios are a symbol of EMI, a symbol of British culture, a symbol for the creative community. This is a historic acquisition and an important step in preserving the legacy of EMI Music. As an Englishman, EMI was the pre-eminent music company that I grew up with. Its artists and their music provided the soundtrack to my teenage years.”

Emi_forsale

We must also remember that Universal did not buy up EMI in its entirety. Only the recording division of EMI has gone to Universal, with the bid for the publishing side going to joint-led Sony-ATV Publishing. If regulators are happy with the move, Sony will become the largest publishing company in the sector – something IMPALA is also concerned about. The EMI catalogue is very valuable, and this seismic shift may be what the competition authorities are particularly worried about, both in the USA and EU. IMPALA’s American equivalent A2IM (the American Association of Independant Musicians) and their president Rich Bengloff stood alongside their European counterpart, stating

“The increased concentration of copyright ownership, historically, has always hurt the independent label community in terms of achieving economic parity and market access. We join our European Impala Independent music label colleagues in their concern over this acquisition and await more detail.”

All that we know for sure is that where there were four, there are now three – the major labels and their ongoing battles for market share have entered a new phase and competitiveness between them will now be higher than ever. How Europe and its competition authorities will favour this new structure is yet to be seen, and the importance of the objections IMPALA and many similar voice may raise is not yet known. There may yet be some twists in the road ahead for the Sony-Universal-EMI love triangle…

 

Leave a Reply

Your email address will not be published. Required fields are marked *


2 + = three

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>