News Column

EU Approves Universal-EMI Merger, But Only With Sale of Labels

Sept. 21, 2012

Alexandra Mayer-Hohdahl, dpa

Universal-EMI Merger.

The European Union on Friday gave its approval to the merger of music giants Universal Music and EMI Recording, ending months of negotiations that saw the US and British firms having to agree to the sale of several labels over competition concerns.

Universal and EMI are among only four big global players in the recording industry, alongside Sony Music and Warner Music. EMI is home to a host of chart-topping artists, including the Beatles, Pink Floyd, Robbie Williams, Coldplay, Katy Perry and Lady Antebellum.

EU competition commissioner, Joaquin Almunia, described the talks as "one of the most difficult discussions in my life as commissioner for competition," pointing to the "very important cultural dimension in this merger."

To complete its 1.9-billion-dollar acquisition of EMI, Universal will now have to let go of many of those assets, including EMI's leading Parlophone record label - with the exception of the Beatles -- and its stake in the Now! That's What I Call Music compilations.

Many national subsidiaries will also have to go, such as EMI's entities in Belgium, the Czech Republic, Denmark, France, Norway, Poland, Portugal, Spain and Sweden, and Universal's entity in Greece.

EU competition regulators insisted on the divestitures because the size of the merged company might otherwise "have enabled it to impose higher prices and more onerous licensing terms on digital music providers," stifling innovation and reducing music offerings.

Their probe focused on the digital music market, including music platforms such as iTunes and Spotify, but also music services provided by mobile phone companies - because its sales "are widely expected to overtake sales of physical music in the near future."

"The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits," Almunia said.

Following the divestitures, the Universal-EMI merged company is expected to have an average market share of just under 40 percent in Europe. Worldwide, Universal currently controls the largest market share, followed by Sony, Warner and EMI.

Almunia said the commission has paved the way for another "strong and credible competitor" to emerge by requiring that two-thirds of the Universal-EMI divestitures be acquired by one buyer who needs to have experience in the music industry.

Industry experts were speculating that Warner or Germany's BMG Music Publishing could be interested.

"We cannot impose a buyer. We cannot say: 'You should not sell to Warner or Sony.' But of course we will continue to be the competition authority," Almunia told journalists in Brussels. "If we consider that ... new threats for competition emerge, we will act."

Overall, the commissioner said he thought the results of the merger negotiations "can be considered as very positive."

US authorities also will have to approve the merger. But Universal already declared itself "delighted" by the developments on the European side of the Atlantic.

"The acquisition will benefit the artistic community and music industry," it said in a statement. "We remain true to our vision: to invest in talent and grow the company to offer consumers more music and more choice."

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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