IMPALA encourages Warner’s new owner to work with independents on market recovery, predicts regulatory problems for sale of EMI

IMPALA Press Release, Brussels, 6th May 2011

As Warner is sold to Access Industries, independent labels in Europe welcome new investment into the sector. They also underline the importance of recognising the value of music and working together with the independents to find new ways to address the current challenges facing the sector.

IMPALA identifies four key issues facing the sector - making access to music as easy as possible, investing in new talent, recognising the value of music and finding ways to level the playing field between the independents and the majors.

Helen Smith, Executive Chair of IMPALA said, “This investment recognises the value of Warner’s catalogues in terms of both publishing and recording, which we hope can now enjoy a sound financial future. We look forward to working with a new voice on solving our sector’s challenges, including levelling the playing field for the independents.”

On the future of EMI, Helen Smith added: “As many commentators have recognised, if one of the market leaders Sony or Universal were to make a move, they would meet a regulatory brick wall. Any attempt to combine EMI with Warner would similarly be blocked unless there are substantial remedies to solve the competition problems of going from four to three majors.”

Further notes
Working together on market recovery

IMPALA maintains that the industry must work together on rebalancing the effects of concentration in a manner that addresses the full scope of the market challenges and the digital future facing the music sector. They have been calling on the majors and the EC since 2000 to seize the opportunity to work together on a blueprint for market recovery. IMPALA also expects the EC to act on its commitment to cultural diversity in the EC treaty and the UNESCO Convention on Cultural Diversity, as well as in the EC’s recent Green Paper, which highlighted the need to level the playing field.

Market access problems for SMEs in music are important because the independents produce 80% of music released in Europe today. Concentration has exacerbated the problems in the music market associated with the current economic climate. Waves of consolidation have reduced music’s competitiveness as well as consumer choice. Over 95% of what most citizens hear on the radio and see on television or on the internet is controlled by four companies. Concentration has simply compounded the overall decline of the sector and highlighted the inadequacies of the majors’ business models. This must be addressed and new players could bring a new vision by working more closely with the independents.

Regulatory issues facing any future mergers

If the current speculation about future mergers is correct, the market share of the majors would be controlled by just 3 companies. The EC would have to investigate any merger, along with the US and other regulatory bodies. The EC traditionally takes the toughest stance amongst the different regulators. It has already issued warnings in previous decisions about the power of the market leaders. It is expected that the market leaders Sony and Universal would not be allowed to get any bigger at all, no matter how they attempt to structure any merger.

Warner and EMI have had a long history of merger discussions. The year 2000 was the first attempt when the Commission found that the merger should not be allowed without remedies – a stance that lead to the parties walking away. Subsequent discussions between the parties were held on an on-off basis over the years and Warner agreed a set of merger remedies with IMPALA in 2007, but EMI and Warner never agreed commercial terms. Today competition concerns remain high but remedies to counter competition problems might convince the regulators as long as they are far-reaching enough to make a significant difference. The EC itself has set a precedent for demanding remedies and has formally recognised that the playing field must be levelled for the independents. In 2007, the EC insisted on remedies in the Universal-BMG merger, and also issued warnings about the power of the market leaders in both publishing and recording, concerns which it had also raised in its previous assessments of SonyBMG.

All the concerns that IMPALA has expressed in previous merger cases have been validated. Every time there is a merger, fewer artists are released and market share is taken away from the independents time. The result is reduced competition and choice for both artists and consumers, as well as reduced cultural diversity. IMPALA has been an active party in several merger proceedings before the European Commission and also the European courts, where in 2006, it overturned the EC's first SonyBMG merger decision.

IMPALA was established in April 2000 to represent independent music companies. 99% of Europe’s music companies are SMEs. Known as the “independents”, they are world leaders in terms of innovation and discovering new music and artists - they produce more than 80% of all new releases. SME’s also produce 80% of Europe’s jobs. Their potential is enormous but is hampered by complex barriers to trade and severe market access problems. The impact on diversity, consumer choice and pluralism is clear. Over 95% of what most people hear and see, whether on radio, retail or the internet, is concentrated in the hands of four multinationals, known as the majors.
Cultural and creative SMEs are now officially recognised by the EU as “the drivers of growth, job creation and innovation”. IMPALA expects the EC and its member countries to put in place key investment, digital and market access measures. Fostering Europe's economy of culture and diversity is one of the EU's top priorities in becoming the world's leading knowledge economy. Culture is a bigger earner than any of chemicals, automobiles or ICT manufacturing and provides more than 3% of Europe's jobs. IMPALA has its own award schemes to help promote cultural diversity and new talent and highlight the artistic contribution of independent music. IMPALA award winning artists include Efterklang, Adele, Radiohead, Arctic Monkeys, Carla Bruni, Manu Chao, Corneille, Katie Melua, Franz Ferdinand, The Prodigy, Placebo and Ibrahim Ferrer (Buena Vista Social Club).

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