V2 Chief Calls For Sanity

V2 Records chief Tony Harlow has called for sanity over the rift that’s dividing the Euro indie music sector since Impala said it would support a Warner-EMI merger.

Referring to it as a "ridiculous situation," he wrote a sometimes humorous March 9 press release that calls for compromise and tries to put the issue in a lighter perspective.

He argues that "despite its small victory in the matter of Sony BMG" the independent sector is still under attack everywhere and successes are becoming as likely as those of Hereford in the FA Cup.

"Rarely do we win the tournament – and even the pyrrhic victories are few and far between," he explains.

Without naming the U.K.’s Ministry of Sound (MOS), which has called for the resignation of the Impala execs who put their names on the agreement with Warner Music, Harlow urged the "nay-sayers" to back the organisation’s board and welcome the chance to make a sensible compromise if it leads to "the creation of the fairest playing field possible."

Impala has agreed to support a Warner takeover of EMI given certain provisos, including the U.S. major giving the indies a bundle of money to fund Merlin, their recently launched digital-licensing and anti-piracy group.

That has led to accusations that the Impala board has sold out and MOS, the U.K.’s largest indie label with sales of more than 2 million units a year, claiming it hadn’t even been consulted on the matter.

Another can of worms has been opened by the fact that many members of the Merlin board, which will benefit from the Warner money, are also on the Impala committee that negotiated the deal with the major.

This has put AIM chief exec Alison Wenham and her board into a real fuddle. They’ve already had a couple of crisis meetings on the issue without managing to come out with any sort of cohesive statement on where they stand.

Impala and AIM are both staying tight-lipped over whether the whole issue blew up because the European organisation was forced to put out the press release saying it supported a Warner-EMI deal much sooner than it wanted.

London Stock Exchange rules obliged the English publicly owned major to announce it had received a new offer from Warner, which responded by confirming the move and claiming it had the conditional support of the indies.

Later the same morning of March 2, Impala released a press statement that it agreed to support Warner’s approach for EMI provided that Edgar Bronfmann Jr.’s U.S. major met certain conditions, including the financial support for Merlin and some broader agreements to hive off some companies and lessen its share of the market.

Neither Impala nor AIM have commented to Pollstar on whether the timing of the press release was forced, and came before the U.K. organisation finished canvassing its members, because Warner had already let the cat out of the bag.

However, the V2 press statement seems to acknowledge as much. Harlow argues that the indies have always been and should continue to be prepared to talk to the majors even if that talking "comes with the necessary compromises to market protocol that non-disclosure agreements present."

He said the fight for Impala (and therefore AIM) has never been a zero sum game, it has always been about the creation of the fairest playing field possible.

"This may not end up being totally fair, but at least it must be better than what we face in the year 2007 without any remedies and with two monoliths dominating the business.

"This has been the stated goal since the year 2000, and we have always offered to sit and talk to any party who would be prepared to acknowledge the impact of increased concentration in the market and was prepared to deal with it sensibly and profoundly."

The irony is that the Sony-BMG deal up for further scrutiny from the European Commission (EC) has been more than enough to put EMI off even thinking about selling out to Warner anyway. The indies have always vigorously opposed the Sony BMG merger, which the EC approved in 2004 and later had the European Court of First Instance throw the judgment back in its face a couple of years later.

The British company, the world’s third-largest music group, announced that it had received a "non-binding proposal" from Warner indicating that it may be prepared to make a 260p per share offer pre-conditional on regulatory clearance.

That offer is much less than the 320p per share Warner was prepared to offer unconditionally last summer, but that was before the European Court told the EC to take another look at Sony BMG and long before EMI started making profit warnings on a regular basis.

It’s also well below the 310p per share that private equity group Permira offered just before Christmas – a bid that wouldn’t have troubled the regulatory authorities.

When Warner and EMI were in talks in the summer, it was said that joining the two companies would produce £200 million in savings.

The figure will be no longer be that high when EMI chief exec Eric Nicoli has finished taking the sword to his own company’s cost base and making considerable savings of its own.

Apart from that, taking a Warner bid of 260p might well have the analysts and business writers theorising on how the London-based company has cut its capital value by nearly 20 percent (50p a share) within the space of a couple of months.