Sony’s EMI takeover ‘has to be blocked’ says IMPALA, as it files official EC complaint

Independent music body IMPALA has lodged an official complaint with the European Commission, opposing Sony’s attempt to gain sole control of EMI Music Publishing.

Sony Corp’s move, announced earlier this summer, would increase its share of EMI to 100%.

The Japan-based Corporation, which also owns US-based Sony Music, has acquired the majority share in EMI which it didn’t previously own via two transactions: a $2.3bn buyout of 60% of EMI from a consortium led by Mubadala, and the acquisition of approximately 10% of EMI previously owned by the Jackson Estate in a $287.5m deal.

According to IMPALA, the buyout would double the number of songs Sony controls, from 2.16m to 4.21m compositions – although Sony-owned Sony/ATV has been EMI Music Publishing’s admin partner for some time, and counted these songs within its industry market share.

Combined with Sony Music’s recordings catalogue, IMPALA says, “Sony would be the biggest and most formidable music company in the world”. (MBW stats don’t quite agree with that: on a revenue basis, we think it would still be Universal Music Group – just – once Sony’s non-music holdings are discounted.)

When Sony became a shareholder in the consortium structure which acquired EMI Music Publishing from Citibank in 2012, the European Commission enforced divestments – directly leading to offshoot acquisitions for the likes of BMG (Famous Music and Virgin Music). 

IMPALA argues that the EC only approved the transaction on the basis that EMI would be run separately and would not be combined with Sony’s own publishing or recording operations.

“Our view is that the transaction has to be blocked. EMI would have a better future as a stand-alone operation or combined with another smaller music company to make a more effective competitor to the majors.”

Helen Smith, IMPALA (pictured)

This was reconfirmed in 2016, says IMPALA, when the Commission allowed Sony to buy out the proportion of Sony/ATV that it did not already own in a $750m deal.

Helen Smith, Executive Chair of IMPALA commented: “It cannot be overemphasised that this is completely different to an ordinary change from joint to sole control. It’s like seeking to merge two majors. That would never be allowed and neither should this. Sony’s latest financial results confirm that ‘EMI will become a wholly-owned subsidiary of Sony.'”

IMPALA says that one of the key areas of investigation will be the online market, where more concentration is likely to cause competition concerns.

“Sony’s position as an indispensable trading partner for online services would be significantly reinforced,” says IMPALA. “It would have immense bargaining power to leverage both publishing and recorded music markets, which it can now exercise without the constraint of its current consortium partners.”

It adds: “If permitted, this transaction would also harm collecting societies, songwriters and composers, and consumers who would face higher charges for music services.”

Said Smith: “No music company globally would hold so much power. Sony would be able to dictate terms to online services, dominate playlists, control collecting societies and capture all key routes to market, at the expense of online services, competitors, authors, and consumers. This would be seismic.”

The European Commission will assess the proposed transaction once Sony submits its formal notification. Competitors and other market participants will receive detailed questionnaires to answer.

The Commission will then decide whether the transaction would lead to a significant impediment to effective competition and if so, what it should do.

Helen Smith concluded: “Our view is that the transaction has to be blocked. EMI would have a better future as a stand-alone operation or combined with another smaller music company to make a more effective competitor to the majors.

“That would be the best outcome not only for competition but also for cultural diversity and consumer choice.”Music Business Worldwide

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