Universal finalises its divestment plan to win EMI bid approval
By CMU Editorial | Published on Thursday 26 July 2012
Universal Music is still working out exactly what package of divestments to formally propose to regulators in Europe in order to win approval for its bid to buy the EMI record company, according to Reuters.
As previously reported, the mega-major has already responded to the statement of objections produced by the European Commission in response to Universal’s EMI plans, and has been busy floating various proposals to placate regulators and the deal’s original opponents in the independent sector. Insiders say that officials are most interested in concessions that involve Universal selling off both catalogues and frontline divisions, and have indicated initial sell-off proposals were not sufficient. The major does now seem willing to do whatever it takes to get the green light for this deal, though it will also presumably be wary of giving way too easily, if only to ensure shareholders in parent company Vivendi don’t get tetchy.
It’s thought that Universal now has to provide its formal divestments plan by next Wednesday, but may do so as soon as this week. The Commission will then take five days to share those plans with other stakeholders who have inputted into its investigation to date. As previously reported, the Commission is due to rule on the merger by no later than 6 Sep, though Reuters says that as soon as Universal formally submits a concessions package that deadline will actually be pushed back fifteen days.
As previously reported, while September is the Commission’s deadline, it is also a timeframe that Universal is keen to stick to, because in its original deal with current EMI owners Citigroup last year it committed to hand over the $1.9 billion it has agreed to pay for the record company that month, oblivious of whether regulatory approval has been achieved. And that may well still be the case, despite reports earlier this week that the major had negotiated a deadline extension with the bank. The New York Post has now reported that the original 10 Sep deadline still stands.
The independent sector remains divided about the EMI deal, despite its pan-European trade body IMPALA still officially opposing the merger. As previously reported, various senior indie label types have recently said they now back the Universal/EMI merger, subject to concessions proposed by Universal chief Lucian Grainge in a letter to IMPALA, mainly to sell divested catalogues to indie labels not equity groups, and to provide funding for indie label trade organisations.
But not everyone in indie land has been placated. And that includes former Cocteau Twin and current Bella Union chief Simon Raymonde, and Declan Colgan of King Crimson label Panegyric Recordings, who have both issued open letters via the Association Of Independent Music.
The former explains what he sees as being the key problem with big music companies, especially in times of crisis, and how allowing Universal to just get bigger is bad news for everyone. While the latter argues that Universal is already far too big, claiming that once – when the major was distributing King Crimson recordings digitally despite the contract with the band the major acquired through the purchase of Sanctuary Music only allowing physical sales – the firm’s lawyer simply said: “We’re so big, you can’t expect us to read every contract we acquire”.
Raymonde concludes by writing: “[Universal] increasing their market share by a few percent via the acquisition of EMI may not SEEM such a big deal (‘what’s a few percent between friends?’) but Universal will want to continue to shape and create digital music services of the future to their own benefit, and such an artificial merger can only spell trouble for smaller labels, and the artists, by monopolising the digital market. The final word … should go to Seth Godin who wrote this: ‘Emerging is when you use a platform to come into your own. Merging is when you sacrifice who you are to become part of something else”.
While Colgan says: “Far from looking for scraps from the UMG table to allow the takeover to proceed, the independent label community should be demanding that UMG is broken up into some of its constituent elements to re-balance the market. With the not entirely surprising news that catalogue sales have outstripped those of new releases in the US for the first time ever, the importance of a broad distribution of music catalogue representation is fundamental to the future of the music industry”.
You can read Raymonde’s letter here.
And Colgan’s letter here.