Is The Music Industry Like Other Businesses?
June 22, 2012 at 3:54 AM (PT)
As ALL ACCESS reported YESTERDAY (NET NEWS 6/21), UNIVERSAL MUSIC GROUP's proposed $1.9 billion purchase of EMI MUSIC was defended in written and oral testimony by executives of the companies before a Senate antitrust committee yesterday (6/21), while drawing more fire from other labels and consumer groups.
The meeting's central question came from WISCONSIN Democrat HERB KOHL, Chairman of the Senate Judiciary’s antitrust subcommittee, who asked "Is the music industry like other businesses, and thus subject to concerns about market concentration, or is it an anomaly in which nothing matters but hits?"
"In almost all industries, reducing the number of competitors from four to three expands the market power of the remaining companies and increases the risk of higher prices," Kohl asked. "Why shouldn't these same principles apply to the music business?"
THE NEW YORK TIMES notes, "UNIVERSAL, a division of the French conglomerate VIVENDI, says its investment will reinvigorate EMI, which was hurt by a disastrous private equity deal. Opponents worry that UNIVERSAL, which would gain a 40% market share as a result of the deal, would assume undue influence over digital music services that depend on the labels for licenses."
UNIVERSAL Chairman LUCIAN GRAINGE, EMI Chairman ROGER FAXON and LIVE NATION ENTERTAINMENT IRVING AZOFF "argued that greater size would not give UNIVERSAL an advantage over other labels because a record company's strength depends on the quality of its artists' music, and it has an incentive to license as many services as possible," reports THE TIMES.
"The thought that we would constrict our artists who we’ve invested in and construct the investment we make in EMI to dissolve the market would be commercial suicide," GRAINGE said.
"Market power is why they’re doing this," said BEGGARS GROUP Founder MARTIN MILLS. "The power to dominate Internet services and impose their demands upon them, the power to leverage a disproportionately onerous deal, the power to squeeze out the competition."