Universal’s takeover of the EMI record companies entered a new phase on Friday when the major submitted its acquisition proposals to the European Commission, where competition regulators will now consider whether to approve the deal.
The major remains confident it can win approval from European regulators, despite EC officials having previously expressed concerns about the further consolidation of the music industry, and amidst strong opposition to the latest merger deal from both the independent sector and rival Warner Music, which will be dwarfed by a combined Universal EMI.
Universal will argue that the music industry has moved on hugely since the last time the EC considered the sector with the mergers of the Sony and BMG record companies and Universal and BMG publishing catalogues in 2004 and 2007 respectively; and that in the increasingly crucial digital domain pricing is basically controlled by the market leader download stores (Apple and Amazon), the indies have proven their ability to compete via Merlin, and Universal has a good record of licensing new digital ventures (albeit at a price).
Officially Universal expects both US and European regulators to pass its EMI deal without remedies, though most outsiders reckon that the EC, if only to be seen to do something, will demand the combined EMI/Universal offloads some of its assets in order to win deal approval, maybe a sizable chunk of catalogue (such as the Virgin divisions) and perhaps the VEVO business, through which Universal arguably controls an important route to market for content owners. A few in the indie sector, meanwhile, remain optimistic the deal may be blocked outright.
Sony/ATV is expected to submit its papers to EU regulators regarding its bid for EMI Music Publishing any day now too. In theory the two EMI deals can be considered separately, and many think Sony’s acquisition might get approved faster, because the entertainment conglom only owns half of Sony/ATV, which in turn will not own EMI Music Publishing outright (the company is leading a consortium). That said, collecting societies, and to what extent European societies should compete, remains a hot topic for some EC officials, and such people are generally only concerned with the publishing sector’s collecting agencies, and if the Sony/ATV deal gets caught up in all that, months could be added to the regulatory process.
So much so, it seems unlikely either of these deals are going to speed over the regulatory hurdles, however optimistic Universal, Sony and EMI’s current owners Citigroup are that ultimately their proposals will get the nods they require. Meanwhile the US Federal Trade Commission is already underway with its investigation into the two EMI deals, and according to the FT officials there have just sent out a second call to the various parties for further information.
Whatever the outcome, expect some interesting exchanges between Universal, Sony, Warner and the indies in the coming months.