Regulators Start Scrutinizing EMI Deals
February 17, 2012 at 3:34 PM (PT)
The wheels of EMI split acquisition -- the music division to UMG, the publishing arm to SONY -- continue to slowly move on. FINANCIAL TIMES reports that UMG has officially delivered its submission to European competition authorities; SONY's offer is imminent.
Separate teams in BRUSSELS and WASHINGTON will review the recorded music and publishing deals; it will be the first time regulators have had the chance to review both sides of the industry at the same time. The U.S. Federal Trade Commission has already sent a second request for information, signaling that it will also give both deals close scrutiny.
Lawyers told the FT that UNIVERSAL will likely have a more difficult time getting approval, since music publishing pricing is usually set by national collecting societies, and SONY owns only half of Sony ATV and 38% of the group buying EMI’s publishing arm. With EMI Music in the fold, however, UMG would control about 40%, when added to SONY, would comprise 60% of the global market, leaving WMG and independent labels far behind.
"In such a highly consolidated and oligopolistic industry, we think that even the combination of the #1 player with its #4 rival might run into serious antitrust scrutiny," BERNSTEIN RESEARCH analysts noted.
WMG will likely argue that the digital world, infected with illegal downloading, has essentially negated the notions of market power or collective dominance. But the wild card here could be the impact of the merger on digital music services such as iTUNES to SPOTIFY, and whether consolidation will inhibit further innovation. UNIVERSAL’s opponents, who include smaller rivals hoping to buy assets it divests, will argue that consolidation will allow UNIVERSAL to dictate prices to digital newcomers.