Warner Music Working With Impala, Merlin to Sell Parlophone Assets to Indies

In a deal designed to help ease its purchase of Parlophone Label Group past European regulators and increase parity between the major labels and the independent music sector, Warner Music Group has agreed to make some of its assets available for purchase by independent labels. IMPALA, the trade organization representing indies in Europe, joined Merlin, which represents the digital rights of independents, in facilitating the deal, announced today.

Sources tell Billboard that WMG will offer up about 25%-33%  of the newly acquired Parlophone assets -- or their equivalent in WMG-owned assets, including possibly licensing and distribution deals -- as part of the deal. IMPALA said it plans to bring more scale into the independent sector through the purchase, licensing or distribution the assets.

The Deal: Blavatnik and WMG Get Parlophone

"Having not blocked the sale of EMI, the result we have negotiated offers regulators the ‘best of both worlds’ in strengthening the independents by bringing more scale into the sector and by creating a more effective challenger to the Universal Sony duopoly,” IMPALA Executive Chair Helen Smith said in a statement. “Making sure our deal benefits labels of all sizes is a top priority and, by setting out the principles the parties agree are essential, we believe we have found a ‘blueprint’ for a market where independent artists should have a more level playing field. It is great to see Warner's commitment to the independent sector reach fruition in this way."

The deal is similar to one struck between IMPALA and WMG in 2007, when the latter was attempting its own acquisition of EMI Group. In this case, the agreement makes it likely that the Parlophone purchase will not face significant hurdles with the European Commission. 

Having first condemned the UMG deal to buy EMI recorded music and then vigorously protested the potential sale of Parolophone to Sony BMG, IMPALA and other members of the independent music community widely praised WMG’s winning $762 million bid for the formerly EMI-owned label group nearly two weeks ago. Universal Music Group had been required to sell off PLG and other assets as part of an arrangement with regulators after acquiring EMI’s recording business in late 2011. PLG includes the Chrysalis and Ensign labels and a roster of tent-pole artists such as Coldplay, Radiohead, Kylie Minogue, Pink Floyd, Daft Punk and many others.

In a statement, Merlin CEO Charles Caldas said negotiating a deal with Warner following the Parlophone acquisition was vital in order to prevent further market consolidation that would be damaging to the indies.

“We had a duty to ensure our members had the best possible chance to continue to compete,” he said. “This opportunity, to grow into what would otherwise be an unbridgeable gap between the largest majors and the rest of the market, should improve their ability to do so."

In addition to setting aside WMG/Parlophone assets, the IMPALA/Merlin deal is said to establish a fund that will help smaller independent labels as they seek to purchase them. An impartial third party will be brought in to ensure equal access among the independents.

Further, Warner has agreed to certain behavioral concessions going forward. The third-place major has said it will lobby on behalf of independents to help achieve parity of access to digital service providers and other ancillary businesses.

“We are pleased to have entered into an agreement under which we will work together with IMPALA and Merlin to support and strengthen the independent music community,” Warner CEO Stephen Cooper said in a statement. “We believe this is an important step that will help to foster an environment in which the independent music community can continue to thrive and create new opportunities for growth, benefiting the music industry as a whole and all of its constituents.”

At this point, indie stakeholders are optimistic that the agreement represents a progressive and necessary step to counteract the effects of consolidation and ensure the continued vibrance and viability of the independent music industry.
“Independents will increase overall marketshare as a result of this agreement and new capacity-building programs will help independents compete more equally in areas of both music exposure and music monetization,” Tommy Boy Records founder and CEO Tom Silverman said in a statement. “I applaud the leaders at Warner Music for understanding the value in the creative and diverse independent label community and for having the foresight to forge this powerful relationship with Merlin and Impala.”