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

UMG's Acquisition of EMI Expected to Experience Bumpy Road to Approval
Universal Music Group's planned acquisition of EMI's recorded music division continues to spark commentary and criticism. European regulators approved the acquisition of EMI's music publishing division by a Sony-led investment group last month. Expect Universal to have a much bumpier road to approval in Europe and the U.S.

The merger could become part of the political theater so often seen on Capitol Hill. Senator Herb Kohl, chairman of the Senate Judiciary Committee's antitrust panel, announced last week he planned to hold hearings on the merger - even though the committee has no official influence over the federal government's antitrust regulators who will decide on the matter.

Kohl's announcement seems to have sparked media interest in the story. From public radio station KPCC to national outlets such as Reuters and the Atlantic, people are starting to take a closer look at what the merger would mean to the music business.

Some people will see the merger as an economic necessity. "Ten years ago, the labels had power," Daniel Sokol of the University of Florida Levin College of Law told Reuters. "Today they don't have any power." If the FTC blocks the merger, he said, "it's just because they don't understand the market."

But other anti-trust experts predict Universal will have a difficult time getting the deal through. One expert told Reuters success or failure will be a function of the number of complaints Warner Music, a vocal critic of the merger, can generate. The eight antitrust experts questioned by Reuters were split on whether or not the merger will go through.

Other onlookers will wonder why the music business should be allowed an antitrust exception because its legacy business is in trouble. "If the government isn't interested in allowing one branch of legacy media to prop up its endangered profits," wrote the Atlantic's Jordan Weissmann in reference to the Justice Department's complaint against Apple and top book publishers over alleged price fixing, "it shouldn't be in the business of making exceptions for another."

The International Federation of Musicians came out against the merger last month. The group says the current market of four major labels means "weak bargaining power and hyper-standardized, disadvantageous contracts" and increased market concentration from a merger would result in "a duopoly (Universal/Sony), which can only be expected to further deteriorate this already imbalanced situation." Independent music companies group Imapala has been a vocal opponent of the deal.

But opposition is not universal. In North America the merger has won the approval of the American Federations of Musicians as well as the Screen Actors Guilt and the American Federation of Television and Radio Artists.

Predictions and stances differ because it's easy to see multiple points of view on the merger. Critics may point to higher e-book prices as proof a Universal-EMI merger will result in higher prices for consumers, but anyone would be hard pressed to say consumers are paying more for music over the last ten or 12 years. Music has become less expensive and more plentiful in digital formats. Besides, the Justice Department's action against e-book pricing has resulted in neither a settlement nor a verdict. Apple and the publishers could prevail. Would Weissmann feel differently about the Universal-EMI merger if the Justice Department fails?

Concentration of market share could have effects beyond mere consumer prices, however. Market power instills an ability to choose which new business models make it to the market. Without Universal's blessing, no mainstream download store, on-demand streaming service or feature-rich cloud model (a la iCloud) would have a chance of succeeding. Unless Congress grants a compulsory license for such endeavors, as it has for non-interactive webcasting, rights owners could possibly hold up progress in new business models. Of course, it's hardly in labels' best interest to try to hold up progress, but it has happened before and could happen again. ( Reuters, The Atlantic)

Pandora Somehow Keeps Getting Lumped In With Social Media Companies
Here's more proof that some investors don't get digital music: Internet radio company Pandora is being lumped into the "social media" category with Facebook, LinkedIn, Yelp and Zynga. As AllThingsD notes, shares of the three companies have risen in May due to a "halo effect" related to Facebook's impending IPO. Pandora's rise to $11.37 Wednesday from $8.56 on May 1 is probably the result of other news, but Facebook is likely a factor, too.

Whatever halo effect carried Pandora up to $11.37 was short-lived. Shares of Pandora were down 9.8% in midday trading Thursday and closed the day down 7.5% to $10.52. The only news item to correlate with the drop was a New York Times report that Spotify is raising up to $220 million in a round that values the company at $4 billion.

Investors may forget - or completely ignore - that Pandora has almost nothing in common with companies like Facebook, LinkedIn and Yelp. While Pandora pays for the content that drives its business, the others pay nothing for the content its users upload to the services. Facebook does not pay users to upload the photos that help make it such a popular social network. LinkedIn does not pay users for uploading their work histories. Nor does Yelp pay people to review and upload photos of restaurants and other places of business. That all four companies have social elements is almost an afterthought.

Companies that build value on user-generated content have distinct cost advantages over companies like Pandora that pay for content. LinkedIn and Facebook can generated more advertising revenue per user by getting more people to spend more time at their sites. But Pandora's costs increase almost linearly as usage increases. Thus, it may become an extremely successful radio company but it will never achieve the economies of scale of a user-generated content business.

Pandora doesn't have too much in common with Spotify, either. Pandora is an Internet radio company that sells advertisements like a radio company. Spotify is an on-demand service that generates revenue from both subscriptions and advertising. Not only do consumers view them differently, so does Congress: Copyright law allows Pandora to operate without negotiating directly with rights owners while Spotify must negotiate directly. The two have different cost structures, too. The 65% to 70% of revenue Spotify pays out to rights holders, a figure given at SXSW by chief content officer Ken Parks, makes Pandora's cost of content - 54% of revenue in the most recent quarter - look puny in comparison. ( AllThingsD)

Web Apps v. Native Apps: Which is Best?
The discussion about mobile apps is sometimes a discussion of native apps versus web apps. The FT killed its apps for iPad and iPhone, paidContent reported this week. The FT has opted for an HTML5-powered web app over native apps and reached 2 million users in April, just 10 months after launch. Using a web app means consumers can access the FT on a web browser on any connected device with a single log-in and subscription payment.

Consumers may not notice much of a difference. The FT says "close to half" of users have bookmarked the app to their home screen, thus replicating the native app experience. The FT is happy with the results of its web app: the app accounts for 12% of subscriptions and 19% of traffic to FT.com. And the FT does not have to give Apple a 30% share of in-app revenue derived from its web apps as it would its native iOS apps. ( paidContent)