Impala May Appeal EC Ruling

The European independent music companies are predictably unhappy about the European Commission allowing Universal’s $1.2 billion takeover of EMI’s recorded music business but so far there’s no word on whether they’ll appeal it.

Impala, the European indies’ association, says it first needs to see the complete written decision, which will require Universal to offload some of its assets.

“Our lawyers will review it and will take a decision accordingly. But we do indeed reserve ourselves the right to appeal it,” Impala executive chair Helen Smith told Pollstar within hours of the EC’s announcement.

“This decision has finally put a freeze on Universal’s ability to expand further and sets a benchmark for constraining abusive behaviour across the whole market,” Smith said in an Impala statement.
 
“Following the approval of the Sony/EMI merger, however, this decision nonetheless reinforces what is already a powerful duopoly,” she said, having failed to persuade the EC to stick to its initial conclusion that the deal is a real danger “in nearly all member states.”
 
“Contrary to the basic principles of competition in cultural markets, artists and consumers will ultimately pay the price,” she added. “In the meantime, it is vital that the divestments process balances the market and maximise competitive forces to the duopoly.” 
 
“Competition in the music business is crucial to preserve choice, cultural diversity and innovation,” said Joaquín Almunia, the EC vice-president in charge of competition policy. “The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits.”
 
Beggars Group chairman Martin Mills, one of the indie chiefs who’s spoken out against the Universal-EMI deal, said it’s good to see that the Commission has seen it as such a threat to the market that it has demanded and received commitments on divestments.
 
However, he also said that should not conceal that fact that Universal’s arrogance has paid off for them, that they have destroyed a significant competitor, and that even with these divestments their ability to dominate and control the market has reached even more unacceptable levels. 
 
“Anyone trying to start a new digital service will be realising that very soon, and we will continue to look to the regulators to monitor ongoing behaviour.”
 
The UK’s Association of Independent Music appears satisfied the EC has done a good job.
 
“Universal is being forced to sell the crown jewels of EMI following their misjudged attempt to persuade the European Commission that there would be no competition concerns”, AIM chief exec Alison Wenham told The Guardian. “We congratulate the EC on a very diligent and thorough investigation.”
 
The divestments Mills referred to include the labels that are home to Coldplay, Blur, Kylie Minogue, Pink Floyd and David Bowie and are responsible for more than 50 percent of EMI’s European revenues. 
 
Apart from Parlophone, Universal will also need to loose some of EMI’s bestselling classical music labels such as EMI Classics and Virgin Classics.
 
Chrysalis, Mute, and Universal labels including Sanctuary and Co-op Music are also on the block.
 
The amount of divestments is more than most analysts had expected, although Universal chief exec Lucian Grainge still believes he can make annual cost savings of £100 million ($162 million).
 
“When I say I’m going to do something, I do it,” he told The Sunday Times.
 
He told Mail On Sunday that the cost-savings will mean job losses but he can only grow the business by making savings and investing in the artists and the music.
 
Analysts can now turn their attention to who will be bidding for the various parts of EMI, although Warner Music Group, BMG, and various private equity firms and independent labels have already bee named as having an interest.
One deal that may be off is Richard Branson’s repurchase of Virgin Records, which he sold to EMI in 1992.
 
Virgin’s not on the EC’slist of companies that must be sold and there’s every likelihood that Grainge will want to hang on to it.