EU to delay decision on Sony and Universal EMI take-over
By Benjamin Fox
The battle for the future of the music publishing industry is set to run until the summer after the European Commission revealed its plan to delay judgment on the take-over of British music publishing giant EMI until August.
EMI, whose artists include the Beatles, David Bowie and Radiohead, is at the centre of two controversial takeover bids led by Sony and Universal Music.
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In November, Sony announced plans to buy EMI's music publishing business in a deal worth €1.9bn. Meanwhile, Vivendi, which owns Universal, agreed a deal of around €1.5bn for EMI's recorded music unit. Last Friday (March 23rd) the EU executive pushed back its deadline for deciding on Sony's bid from April 2nd to the 19th.
EMI is being sold off by American bank Citigroup which acquired control of the company when previous owner Terra Firma, a high-profile private equity firm, defaulted on its debt repayments in 2007.
Universal already has the largest market share in music publishing with a catalogue including Madonna and U2. Sony, which is currently the fourth player in music publishing, would supplant Warner Music and the up for sale EMI if the takeover is approved. Rival music publishers claim that the takeover would give Sony and Universal a combined market share of 60%.
However, both Universal and Sony, who are acting in partnership with US private equity fund Blackstone, told the Commission earlier this week that they would sell off parts of their existing catalogues in a bid to secure the Commission's approval of the deal.
Universal is auctioning its classical music and gospel catalogues in a bid to raise €500m to cut down its market share and help fund the EMI deal, while Sony has promised to sell off parts of its business.
Officials from the Commission's anti-trust unit launched a detailed investigation into whether the take-overs would lead to an effective duopoly in the music market earlier this month.
Competition Commissioner Joaquin Almunia said on Monday (26 March) this week that he wanted to "make sure that consumers continue to have access to a wide variety of music in different physical and digital formats." The Commission is also seeking assurances that artists would be able to switch labels and would not be affected detrimentally once the two deals are in place.
Helen Smith, the executive chair of Impala, a music association representing independent record labels, insists that "however this deal is structured in terms of finance and ownership, the result is the same - Sony would increase its negotiating power to an unacceptable extent. We expect the regulators to block both Sony and Universal's bid to buy EMI."
In a statement released on February 28th, Impala urged the Commission to focus its probe on how the deal would increase the power of Sony and Universal to control prices and other terms.
Meanwhile, a statement issued by Sony said that they remained "confident that the transaction will be approved." while Universal insisted that they would "co-operate fully...and look forward to a successful resolution of the process."