Updated: Layoffs, New Appointments at Universal-EMI Canada
Updated: Layoffs, New Appointments at Universal-EMI Canada

As the music industry anxiously awaits whether or not Universal Music Group's purchase of EMI Music will be approved by European and U.S. regulators, the media is in overdrive reporting every twist and turn of the labyrinth process as if it were news from the Oracle of Delphi.

Today, no less than three news outlets -- the Financial Times, Reuters and Music Week -- ran stories on the "reported" content of the European Union's regulatory agency's statement of objections of the UMG-EMI merger based on unnamed sources. Most of the information is in keeping with what has been widely -- and often -- speculated upon: that Universal will have to divest itself of some of its holdings to meet regulatory concerns. Although the specifics of the report would seem to validate much of what the critics of the merger have been saying for months.

The $1.9 billion merger, as has been widely repeated, will result in Universal Music having nearly 40% of the recorded music market. The deal has caused much consternation among independent labels, major label rivals and consumer groups who have argued in testimony, op-eds and reports that the deal will give UMG disproportionate power in the music market place.

Universal Music Group Receives Statement of Objections From European Commission Over EMI Deal

Today's Reuters story said that "'EU regulators have told Universal Music Group that its plans to buy an EMI unit will significantly impede competition, signaling a possible veto unless it offers major concessions,' three people familiar with the matter said on Tuesday." This should not come as news to anyone.

More notable was the EU's disagreement with Universal and EMI's claims on the role of piracy in determining its market share. The Reuters story claims the commission did not agree with the labels' assertion that piracy, as well as successful digital retailers as Apple iTunes and Amazon, will curtail its power and market share.

Vivendi Committed to UMG's EMI Purchase, Selling Activision (Report)

The Financial Times reported that, "According to people who have seen a 'statement of objections' circulated by the European Commission, it argues that Universal, the world's largest music company, already extracts materially higher prices from digital distributors than rivals, and that buying EMI would allow it to raise digital music prices." These allegations of higher digital prices were made in the past by the EU regulators when considering Sony's purchase of EMI Publishing; so it only stands to reason the same charges would be levelled against Universal, which has a larger share of the market than Sony.

And Music Week in its report added that, "The Commission reportedly disagreed with Universal's assessment of its market share, which excludes music it distributes for independent record labels..." This is what many in the independent music community have argued for months.

Universal To Respond To EU Letter of Objections By July 3 (Report)

Finally, Music Week also reported that the EU is taking a look at UMG's publishing holdings as part of its market dominance, an issue Billboard's Ed Christman has raised in the past.

All of the EU's reported objections -- that piracy and digital retail in the market place will not curb the merger's power; that UMG currently has undue power in determining digital music prices; that Universal should counting indie distribution and its publishing as part of its market share; will make the burden of concessions that much higher for the merger to happen.

As the FT pointed out, statements of objections are common in EU antitrust process, and despite that, "25 of the last 27 mergers that went to an extended review" were approved.

(Additional reporting by Ed Christman)

Questions? Comments? Let us know: @billboardbiz

Print