Market consolidation
IMPALA’s aim is to keep the market as open and as competitive as possible for the independent sector.
This means keeping an eye on what’s happening with consolidation. For example, Sony’s acquisition of AWAL and Kobalt neighbouring rights from Kobalt music group raises concerns that the move squeezes the independents further in an already very concentrated market. This is currently being investigated by the UK’s CMA. Sony’s aggressive acquisition strategy follows a whole range of deals eating into the independent sector from the Orchard, to Finetunes, Fonofile, to name a few and also buying more shares of EMI year after year, to finally get full control of the company in 2018. The CMA will also analyse the question of the consolidation of the UK music market, upon recommendation from the parliament and government in the frame of the inquiry in music streaming (read IMPALA’s reactions here and here, and read the parliament’s report on “The Economics of Streaming” here).
Acquisition of key independent players is also happening in key national markets across the globe. In April, Sony announced buying Som Livre, Brazil’s biggest independent music company, in a deal that will increase Sony’s power significantly in the region and as well as with digital players as Brazil is one of the world’s leading digital markets. This will inevitably have an impact in Europe given the importance of Som Livre’s repertoire worldwide as well as the strategic significance of this deal. In late April, Sony also acquired the music catalog of the Mexican independent regional label and management company, Remex Music, for an undisclosed fee.
UMG has sold 20% of its shares to Chinese tech giant Tencent. In addition, Tencent Music Entertainment also took a stake in UMG’s China operations and we understand negotiations continue with both Tencent and other potential purchasers. UMG also confirmed its plan to do an IPO in September 2021. In parallel, in China, the competition regulator started to become critical of Tencent’s exclusivity deals and ordered Tencent to relinquish any exclusivity rights it still has over music catalogue.
Other market developments have also been flagged by IMPALA as a risk, including Spotify’s move to reduce royalty rates in return for algorithmic plays, which IMPALA and others in the sector have described as basic pay for play, payola as it is known when it comes to traditional radio plays (see point 9 of IMPALA’s 10 point plan on streaming, revisited in April 2023, two years after the release of our initial plan).
See also below for more info on IMPALA’s track record on competition cases.
IMPALA’s track record on competition cases
IMPALA has an impressive record on competition cases in the music sector. The first EMI/Warner merger was withdrawn in 2001 following objections from the EU after IMPALA intervened, in its first year of existence. It also won a landmark judgment in 2006 in the Sony/BMG case, and when Sony acquired 30% of EMI publishing in 2012, it was at the cost of significant divestments. The biggest set of remedies proportionately ever in a merger case was secured later that year, when UMG was forced to sell two thirds of EMI records and had to accept ten years of scrutiny over the terms of its digital deals. When WMG bought Parlophone in 2013, IMPALA secured a hefty divestments package for its members. IMPALA also represented the independents in the various Sony/EMI merger cases from 2012 to 2018, where the EU ultimately approved the acquisition based on remedies Sony agreed in 2012.
On top of mergers, IMPALA has also been involved in other anti-trust cases involving the music sector, such as the abuse complaint against YouTube in 2014 and the call for regulating unfair business practices by large online players. IMPALA also submitted observations on Apple’s bid to acquire Shazam.
An overview of merger cases and related EU practices and decisions since 2000 is available to members.