Crunch time for Sony/ATV’s $750m Jackson deal as rivals tell EC it will damage marketplace

Sony’s rivals have been asked to tell the European Commission why they believe the company’s acquisition of the Jackson Estate’s 50% share in Sony/ATV may distort the wider music business – as time ticks down on a D-Day for the deal.

Music businesses and digital services have been invited to complete and submit a survey pertaining to how the $750m buyout could alter the music business in future – a document which MBW has obtained.

The questionnaire was due back with the EC’s antitrust regulators on Tuesday (July 5), but sources tell us that some parties arguing against the deal –  which may include IMPALA and Warner Music Group – have agreed an extension with the Commission.

Experts inform us that the most crucial part of the document covers Sony’s ‘control share’ of the music business; a measure by which a company’s ownership of both publishing and master rights is measured against the annual Top 100 singles chart.

Sources say that some estimates put Sony’s ‘control share’ of 2015’s Top 100 chart in excess of 60% in at least two European countries – a figure which may well raise eyebrows at the EC.

The stat would mean that, across all music rights, Sony Corp – as 100% owner of Sony/ATV – would be a significantly bigger player in these markets than even Universal Music Group.

Other questions contained within the EC document regard whether Sony has either the ‘ability’ or ‘incentive’ to leverage control of Sony/ATV’s assets to ‘achieve better terms on publishing rights or on recording rights’.

If the answer to that question seems something of a no-brainer, things heat up towards the end of the 50-plus questions contained within the survey.

The Commission asks music businesses how Sony’s sole control of Sony/ATV would affect:

  • (i) Their own business;
  • (ii) Royalty rates for publishing;
  • (iii) The availability of songwriters in the marketplace;
  • (iv) Consumer choice and ‘diversity of online music’;
  • (v) Retail prices of online music;
  • (vi) Whether increased royalty rates will push up streaming subscription prices, and therefore make consumers switch to ad-funded music;
  • (vii) The market strength of independent publishers;
  • (viii) The ability for new publishers to enter the market successfully, and for rival publishers to expand.

The toughest questions are reserved right for the end – when parties are asked if, following the acquisition of Sony/ATV, Sony would have the ‘ability’ and ‘incentive’ to use its market power ‘to influence rates and conditions’ for both publishing and recording rights.

After the EC’s regulators have mulled over the responses, they will decide if Sony is permitted to fully acquire the Jackson Estate’s holding in the EU.

Should they conclude the deal is problematic, they could reject it outright on competition grounds, or ensure concessions are required – meaning the sale of assets to others in the marketplace in order to lessen Sony’s dominance.

The last major publishing deal to face this process was Sony/ATV’s own purchase of EMI Music Publishing in 2012 – a buyout made as part of a consortium alongside the Jackson estate, plus Mubadala and others.

The $2.2bn deal didn’t escape the EC’s scrutiny unscathed, with Sony/ATV was forced to sell on assets such as Virgin Music and Famous UK Music Publishing – both snapped up by rival BMG.

The EC is expected to make its final decision over the Sony/ATV acquisition this month, before August 1.Music Business Worldwide

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