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Indies and songwriters hit out as European Commission approves Sony’s EMI deal

By | Published on Monday 29 October 2018

Sony/ATV

Songwriters and independent music companies have hit out at the decision of competition regulators in Europe to approve Sony’s deals to take complete ownership of EMI Music Publishing. The European Commission announced it was green lighting the deals on Friday, despite Sony making no concessions to address the concerns of those who opposed them.

Sony led a consortium of investors to buy EMI Music Publishing in 2012. Since then Sony’s own music publisher – Sony/ATV – has administrated the EMI rights. Earlier this year Sony announced its plan to buy out the other investors, taking complete control of the EMI songs catalogue, and allowing a proper merger of the Sony/ATV and EMI publishing businesses.

Various trade groups representing songwriters and independent music companies opposed that move, arguing that it increased Sony’s already significant control over music rights in Europe.

Sony, of course, controls many recording rights – both directly through the Sony Music labels and via its label services business The Orchard – on top of the song rights respectively controlled by Sony/ATV and EMI. Particular attention was put on the Anglo-American repertoires of the Sony and EMI publishers, which are licensed to digital services through direct deals, rather than via the collecting societies as is the norm with other European repertoires.

Pan-European indie label trade group IMPALA did some maths and found that – if you combined the catalogue of recordings released or distributed by Sony Music and the Anglo-American song catalogues of Sony/ATV and EMI – on average the Sony group controlled, at least in part, well over 50% of the tracks that charted in seven key European markets in 2017. In the UK, Sony had control over an average of 73% of charting tracks, while in Spain that control of charting music went up to 89%.

IMPALA argued that EU competition regulators had previously expressed concern over much lower chart domination by any one company. Nevertheless, on Friday the EU’s competition authority announced that Sony’s proposal “raises no competition concerns”.

This conclusion was in no small part based on the fact that Sony/ATV has basically controlled the EMI songs catalogue since 2012 anyway, meaning Sony already enjoyed the power of controlling both catalogues when making direct deals in the digital space. The regulator considered whether the other investors in EMI had “acted as a constraint” over the way Sony negotiated those deals but concluded that the removal of those investors wouldn’t change much.

The regulator did consider Sony’s recording catalogues as well as the combined Sony/ATV/EMI songs repertoire. And in doing so referenced concerns that the company could leverage one side of the business to secure better terms on the other. However, it concluded that the other investors in EMI would have approved of such tactics being employed in deal negotiations anyway, so that their removal from the proceedings wouldn’t alter anything.

Despite this, the competition authority did not specifically deal with the fact that it’s generally in the interest of major music rights holders to exploit their song rights to get better deals on their recording rights, rather than the other way around. That’s because industry conventions mean that labels usually keep the majority of recordings income, while the majority of publishing income is paid over to the songwriter. Therefore it is the interest of big rights owners for recordings rights to see a bigger share of income than publishing rights.

That doesn’t mean that song rights have actually been exploited in that way – indeed Sony/ATV has led the call for songwriters to get a bigger slide of the digital pie – but they could be.

The EC’s statement did allude to this fact by stating that “authors could credibly threaten to switch away from Sony if it attempted to degrade the value of their publishing rights to the benefit of its recording division”. Although it didn’t explain how Anglo-American songwriters who have assigned at least some of their rights to Sony/ATV for long terms – or even ‘life of copyright’ – could credibly make any such threat.

Either way, those who opposed Sony’s EMI deals were predictably scathing of the EC’s conclusions. “This goes against the regulator’s own precedents”, IMPALA boss Helen Smith stated on Friday. “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”.

She continued: “This is bad news for the music sector and the digital single market. 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”.

In the UK, songwriter organisation BASCA confirmed it was also “disappointed” with the EU approval of deals that will create a “major super power”.

It’s Chair, Crispin Hunt, stated: “It is disappointing that this decision will create a behemoth that could hinder balance, diversity and competition for music. Sony is a great music company but it is through competition as opposed to oligopoly [that] we all move towards market success and the innovative future music deserves – online and off – for indies, the self-releasing sector and majors”.

Back at IMPALA, Smith noted how the fact that Sony/ATV already controlled the EMI catalogue following the 2012 deal had impacted on the decision. She added: “The outcome is perplexing. It sends a message that a move from four to three 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”.

Smith confirmed that IMPALA will now review the EC’s decision very carefully – and that it expects others to do likewise – before deciding whether to take further action.



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