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IMPALA lodges concerns with European Commission over “seismic” impact of Sony’s EMI deals 

By | Published on Tuesday 14 August 2018

IMPALA

IMPALA, the organisation that represents the independent music community in Europe, has made a pre-emptive strike as Sony Corp begins the process of seeking approval for its bid to take complete control of the EMI Music Publishing catalogue. The trade group has confirmed that it has already lodged concerns with the European Commission about the two deals Sony has struck up to make that happen.

Sony, of course, led a consortium of investors to buy the EMI Music Publishing company back in 2012. Since then Sony’s own global music publishing outfit, Sony/ATV, has administrated all the EMI-controlled song rights. Back in May, the entertainment and electronics conglom confirmed it had agreed to buy out most of the other members of that consortium in a $2.3 billion deal that would give it a 90% stake of the EMI songs business.

The remaining 10% was controlled by the Michael Jackson estate, which was Sony’s partner in the Sony/ATV business back in 2012. Although the Jackson estate sold its half of Sony/ATV to Sony Corp in 2016, that deal didn’t include the concurrent stake in the EMI catalogue. However, late last month Sony told investors that it had agreed a new deal with reps of the estate that would give it 100% control of EMI Music Publishing.

The outcome of those deals is that the EMI songs business will become a wholly owned subsidiary of Sony Corp and – presumably – will be properly merged with Sony/ATV down the line. With Sony/ATV sitting alongside the Sony Music record company, and the firm’s separate Japanese music companies, that gives Sony a lot of power in the music business.

The EMI deals still need to be approved by various competition regulators, however, and IMPALA says that the transactions raise important questions for said regulators in the European Union. Mainly because of remarks the EC made when investigating the aforementioned 2012 and 2016 deals, when Sony led the consortium that bought EMI and then when it bought the Jackson estate out of Sony/ATV.

Doing the maths, IMPALA says that the deals will double the number of songs controlled by Sony, from 2.16 million to 4.21 million. “Combine that with Sony Music’s huge recordings catalogue and Sony would be the biggest and most formidable music company in the world” it observes.

It then notes that: “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”.

Arguing that the new deals would remove these ‘safeguards’, IMPALA boss Helen Smith said this morning: “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”.

IMPALA reckons that regulators will specifically consider the impact a boosted Sony would have on competition in the digital music space. It says: “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”.

Smith continues: “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”.

Sony is still going through the administrative process of seeking approval from relevant competition regulators. The EC will seek input from various other stakeholders before deciding whether the deals need a more thorough investigation, and ultimately whether it should seek to block the deal or demand ‘remedies’, which would most likely mean forcing Sony to sell off some of its catalogues.

Smith concludes: “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”.



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