With the European Commission expected to make a ruling on Sony/ATV’s bid to buy the EMI publishing company tomorrow, the New York Times has published extracts of a confidential report that possibly provides some indications of what will happen to EMI Music Publishing if the takeover goes ahead.
As previously reported, the Sony-led bid to buy the EMI publishing firm is slightly complicated, because Sony does not own Sony/ATV outright, and a number of other investors are also part of the EMI purchase. Sony/ATV owner Sony Corp Of America and the Michael Jackson Estate would be joined by GSO Capital Partners, Jynwel Capital, the investment arm of the Abu Dhabi government and one time record industry man and film producer David Geffen as shareholders in EMI Publishing.
But day to day the EMI publishing business would be controlled by Sony/ATV, which is relevant to competition regulators because, while Sony Corp does not own any of its music publishing interests outright, Sony/ATV chief Marty Bandier would control by far the biggest publishing catalogue in the world (31% market share according to this confidential report), which would make him very powerful indeed in digital licensing and collecting society dealings. Opponents to the deal say that kind of market dominance would be anti-competitive, and damaging to the emerging digital music sector.
Sony/ATV’s control of EMI is also key to Sony’s co-investors though, because it will enable economies of scale that will maximise the profits of the EMI publishing catalogues.
Because of the number of investors in the EMI deal and, seemingly, an explicit agreement between Sony and the Jackson Estate, EMI Music Publishing will remain an autonomous company if the deal goes ahead, so its songs and songwriters won’t be absorbed by Sony/ATV, and presumably the firm will need to retain its own A&R teams.
However, according to the report, prepared for Sony by bankers at UBS in January as part of plans to issue bonds to help fund the acquisition, Sony/ATV will look after the administration of the EMI catalogue and handle licensing deals, enabling significant cost savings, ie redundancies. The report suggests that over half of EMI Publishing’s 515 employees could be let go, 152 in the first year of ownership, 174 down the line, resulting in savings of $70 million a year overall, after Sony/ATV has taken a commission for its work.
The report was written for investment types four months ago, so it’s not clear how much of the plans in the document is actual current strategy, but it seems clear that if the Sony/ATV deal does go ahead there will be considerable cuts at the EMI publishing group, even though the company will remain autonomous in some respects. Needless to say, given the ongoing investigation into the competition elements of the proposed deal, Sony refused to comment on the document, telling reporters yesterday: “Discussing details of any integration plan is premature while the regulatory approval processes are ongoing”.
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