Indie Case For Cultural Diversity

The indie music companies will be expecting European ombudsman P. Nikiforos Diamandouros to thoroughly investigate whether the monopolies regulators took enough notice of cultural diversity when allowing the Sony-BMG merger to pass without remedies.

They had hoped the European Commission would introduce a number of measures to address their increasing concern regarding the dominance of the big four record companies.

Apart from appealing the actual decision, the indies are urging Diamandouros to look at the way in which it was reached. If he’s not happy with the Commission’s process or the conclusion, they could have a case for claiming damages against it.

IMPALA, the European indies trade organisation, will particularly want him to examine if the Commission has acted according to Article 151 (4) of the European Treaty, which obliges it to take cultural diversity into account in all its decisions.

"Twenty years ago the market was balanced between the majors and big competitive independents. There was lots of new music and it was a really interesting market for consumers," IMPALA secretary general Helen Smith told the U.K.’s Independent.

"Today many consumers are not fascinated by what’s going on. A part of that undoubtedly comes from concentration, which leads to complacency. It’s not in the interests of big companies to be innovative," she explained.

"The independents are very strong at discovering new artists. They just need a fair crack at the whip. Let the consumer decide. But if the consumer can’t hear what you’ve got to offer, they can’t make a decision."

The indies fear that the major labels have the financial muscle to deprive their acts of an even break in two key areas; airplay and racking retail space.

This is the Commission’s second review of the Sony-BMG merger. The EU’s first assessment was set aside last summer by the European Court.

The court upheld an appeal by IMPALA of the approval of the merger in 2004 without remedies.

This echoed the Commission’s finding in 2000 when it held that EMI-Warner should not be allowed without remedies – a stance which lead to the parties walking away from the merger.

In 2006 the European judges found that the Commission had ignored overwhelming evidence that competition would be severely damaged by Sony BMG, and had also made an unexplained U-turn when it walked away from the serious objections that it had previously highlighted.

The indies’ worries are being further exacerbated by Universal Music Group gobbling up two more U.K.-based independent companies by paying £44.5 million (and taking on nearly £60 million worth of debt) for Sanctuary Music Group and £7 million for V2.

Universal, the world’s biggest music company, has since announced that Sanctuary’s U.K. record company will "no longer continue as a stand-alone, front-line record label."

In a separate representation to the EC, IMPALA has asked Commissioner Neelie Kroes to examine the publishing divestments ordered under the Universal-BMG merger, and then compare them to the companies that Universal has snapped up since.

Apart from Sanctuary and V2, the other examples IMPALA cited include the purchases of Vale Music in Spain, ARS in Belgium, Magic in Poland and Lionheart in Sweden.

"If Universal continues to buy up the independent sector at the rate of one a week, how many will be left when Commissioner Kroe retires?" said IMPALA president Patrick Zelnik.