What's interesting about the music business is that on the outside looking in, it appears there are many record labels around the world. Everyday a new a record company pops up, naming itself such and such records, or whatever catchy name its owners can think of.
But in actuality, there are only four record labels in the world, and the rest are merely subsidiaries. Some smaller labels are subsidiaries of other subsidiaries, and it goes on and on. It can get kind of tricky.
The four record labels, often known as the "Big Four," are Sony BMG, Universal Music, Warner Music Group, and EMI. These four root labels contain branches upon branches of smaller labels that of course get a smaller cut of the profits. In most cases, the smaller the label, the smaller the cut. And never mind the artist getting their fair share.
Last November it was revealed that the Big Four may turn into the Big Three, as Universal Music said it had strong interest in purchasing EMI.
If the $1.9 billion deal is finalized, it would make Universal Music, which is owned by Vivendi, one of the most powerful record labels in the world, or as critics say, just about the most monopolistic record label in the world.
Watchdog barks
On June 14th, two consumer watchdog groups, the Consumer Federation of America, and Public Knowledge, released a report that encouraged government regulators to halt the $1 billion deal, or at least look into the possible negative repercussions.
The report, The Role of Antitrust in Protecting Competition, Innovation and Consumers As The Digital Revolution Matures, makes the claim that the buyout would ultimately cause a major blockage in the competitive world of digital record sales. It's possible the deal could impact physical record sales too.
With huge artists including everyone from Diana Ross to Rihanna, Universal Music Group doesn't really need a corporate power boost.
But if anyone knows anything about the music business, they know record companies leave no financial stone unturned, and will do questionable things to maintain the bottom line first, everything else second.
The two consumer groups also believe the buyout could negatively impact the music-buying public. If one label owns the lion share of the decision making, it could unfairly dictate prices for albums when your favorite music is released, and possibly control the amount of song freebies consumers get through downloads or promotions.
Congressional hearing
On June 18, authors of the report will give a briefing on Capitol Hill to explain the specific potential dangers of allowing one label to posses a disproportionate level of authority.
Just to really put the buyout into perspective, Universal would have the rights to the music of not only its own impressive artist catalogue, but that of Pink Floyd, David Bowie and The Beatles, all EMI artists.
Back in May of this year, it was reported that over 30 employees at Universal made a yearly salary of $1 million or more. The report of the ultra-high salaries came at a bad time for Universal's parent company Vivendi, as the deal drew unwanted attention to Universal's overall finances. Vivendi sent a financial regulator to Universal in order to clean house.
The European Commission has already filed an antitrust complaint against Universal, and in the U.S., the Senate Antitrust Panel will hold a hearing to look into possible problems with the colossal sized deal.
How much will the possible deal actually affect consumers? It's hard to estimate at the moment, but one should apply the same possibilities of any other global company possessing an abundance of power and influence.
Worst case
The worse case scenario for any one record company having majority say, would be a level of musical control that gets to the listeners. Historically, record labels have been known to force annoying trends and musical perspectives onto the public.
In the past, record labels had a desire to develop artists and release music that was groundbreaking. Today, there is too much money to be made for labels to be solely interested in art for art's sake, which is why a lot of the popular music you here today sounds similar to all the other popular music.
The debate on whether the Universal deal should go through or not, is just in its beginning phases. After the Capitol Hill briefing next week, and the upcoming panel hearing, we'll have a better idea on which way this road of battle will shift.
ConsumerAffairs reached out to the authors of the report in attempts to get additional insight into what the potential deal could mean for music consumers, and the music business at large.
Upon their response, more of this story will be forthcoming.
How they voted
Yes
Yes