Done Deal: Universal Buys EMI -- What it Could Mean For Music Consumers
Critics of the merger say it could raise music prices
Tuesday, September 25, 2012
Last week both the U.S. Federal Trade Commission and the European Commission (EC) approved Universal Music Groups (UMG) takeover of EMI, making UMG even bigger giants in the music industry, now owning the catalogues of mega acts like the Beatles and Pink Floyd.
In the buyout that went for a cool $1.9 billion, UMG had to let go of some of its own major acts like Coldplay and the Gorillas, which was a stipulation European regulators set in place to better ensure fair competition.
Chairman and Chief Executive Officer of UMG Lucian Grainge, was obviously thrilled at the closing of the deal, as he believes it will better allow his company to provide a much-needed jolt into the current music industry.
“It will enable us to continue to invest in more music, to create investment opportunities for the entire Universal group,” he told the Los Angeles Times in a recent interview. “It will give us the opportunity to work with entrepreneurs in different genres and it will give us a cushion through this crucial crossover period as we hurtle toward a primarily digital business.”
40%? No problem
The deal gave UMG ownership of 40 percent of the music industry, after the FTC voted 5-0 and said that approving the deal would not harm or threaten the level of competition within the music industry by any measure.
“Commission staff did not find sufficient evidence of head-to-head competition to conclude that the combination of Universal and EMI would substantially lessen competition, said Richard Feinstein, FTC’s bureau of competition director.
Critics of the merger disagree that music industry competition wouldn’t be threatened and say that it truly would negatively impact the consumer. And with now only three record labels in Sony, Warner Bros. and UMG controlling 90 percent of the industry, it could drive prices up for music buyers considerably.
Detractors also say the merger could harm the way digital music is licensed and distributed, which can also potentially damage the way consumers receive their tunes.
And now with UMG having the most power in the music industry, critics also say the deal could potentially allow the record label powerhouse to restructure digital music prices and impact how songs are able to be downloaded or shared.
Also, with one record label owning the lion’s share of the market place, it could change the rules of posting music to social networking pages and how we're able to use songs as ring tones.
Will streamers still be streaming?
Furthermore, music providers like Spotify, Jango, or Pandora could be forced to pay even costlier licensing fees, as all of these companies are currently agreeing to some hefty pricing to host the music they provide consumers.
The merger also gives fewer options for those subsidiary labels under UMG and those formerly under EMI, particularly in the way these smaller companies are able to sell and release music.
The deal also gives less wiggle room to independent and signed artists that want to negotiate or re-negotiate fair contractual terms. However the EC feels the provisions set in place will keep these potential occurences from ever happening.
“The Commission had concerns that the transaction, as initially notified, would have allowed Universal to significantly worsen the licensing terms it offers to digital platforms that sell music to consumers. To meet these concerns, Universal offered substantial commitments. In light of these commitments, the Commission concluded that the transaction would not raise completion concerns anymore,” it said.
The FTC gave no such stipulations and honored the merger as it was requested.
Opponents warn of negative impacts
Previously, ConsumerAffairs spoke to Jodie Griffin, an attorney for the watchdog group Public Knowledge based in Washington D.C, who is strongly opposed to the merger and feels it could harm the current way digital music is provided to the consumer.
And having fewer record labels compared to more of them, threatens to negatively impact both the music lover and the casual music consumer.
“This merger gives Universal increased incentive and ability to discriminate against digital music services that challenge their business models,” she said. “We think that the FTC should have done more to protect competition in the U.S.”
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