Things are coming to a head in the European Union commission's review of Universal Music Group's bid to buy EMI's recorded-music operation.
On Friday, an EU advisory committee is expected to vote on whether or not to approve the acquisition, sources say. The committee is comprised of representatives of the 27 EU states and chaired by Joaquin Almunia, VP of the EU and Commissioner for Competition, who will make a recommendation on the deal and make his case for that decision.
After the advisory committee votes, Alexander Italianer, Directorate-General for Competition, then "incorporates the comments of the [advisory committee] (if any) and we inform [them] on how the directorate-general for competition has taken into account the [their] opinion," an EU Commission spokesman told Billboard.biz. "Only then is the final decision adopted by the Commission." After the decision is adopted, a report must be written and submitted on September 27.
Sometime between Friday and the 27th, the decision is likely to leak out, but probably not before UMG has to tender 1.2 billion euros in payment to Citigroup, EMI's current owner, on September 9.
While some sources say that the deal will be approved thanks to the latest round of UMG concessions, others say they still are unsure how the EU will decide.
Universal/EMI: Deal Looks Likely to Be Approved, But at What Cost to UMG?
According to sources, UMG divestment package now includes selling the global rights of the Parlophone (minus the Beatles' catalog), Chrysalis, and Sanctuary catalogs, while previously UMG was trying to get by with only offering to selling the European rights.
In the meantime, the U.S. process is also ongoing, with the Federal Trade Commission having wrapped up its questioning of the industry on the deal. While the FTC deliberates on the deal, opponents of the acquisition continue to make their case against it.
In a letter submitted last month to chairman Congressman Bob Goodlatte and ranking member Congressman Melvin Watt, both of the House of Representatives Subcommittee on Intellectual Property, Competition, and the Internet, A2IM president Rich Bengloff said that any merger among the four major labels should be evaluated in terms of how the majors use "their clout to influence the market place allocation of promotional and marketing opportunities and to garner a disproportionate share of the available music revenues from numerous sources."
In an example that is not directly related to sales, he pointed out that when the Grammys were presented earlier this year, independently owned non-major label music labels scored a total of 34 Grammy awards of the 76 awarded, and that collectively they control about 30% of music market's share, yet the indie sector only commands 12%-13% of radio airplay. "This difference occurs because independent labels lack the resources and clout necessary to gain substantial radio promotion," the letter states. "Moreover, our shelf space at physical retail stores often is limited, and independents routinely obtain a smaller-than-market-share proportion of digital retailer/streaming service promotions at iTunes, Amazon, Mog, etc. due to a lack of cooperative advertising dollars.
"The reason for this disproportionate treatment is simple: when the major labels use their clout to gain more than their share of revenue stream, retailers must make up the difference somewhere," the letter continues. "Often that 'somewhere' is directly from the independent labels."
Consequently, Bengloff argues that "if the proposed Universal/EMI merger is allowed to proceed as planned in the U.S.," the world's largest music market and home to the vast majority of the technology companies who work with the music community, "it will have a clear negative impact on music consumers and emerging technology companies. Healthy competition would be diminished as one dominant market leader, Universal, would possess even more damaging clout in terms of both consumer pricing and the means by which music is made available."
In response, a rep for UMG sent the following statement: "Rich Bengloff clearly does not speak for the many indie labels and artists who have come out publicly in support of the deal. There is growing recognition that Universal Music's investment in EMI will create more opportunities for new and established artists, expand music output and support new digital services. Barriers to entry have evaporated in today's digital environment and there are more ways than ever for labels and artists to get their music out to fans. We are working with regulators around the world and are confident of winning approval."
How all of this will play out remains to be seen, but many elements will be clear in a month's time at the latest.