Current UMG owner Vivendi is suspected to sell half, if not more of, the major music company for somewhere in the vicinity of $40 billion over the next year.
Google parent company Alphabet ended 2018 with cash, cash equivalents, and marketable securities of $109bn. It definitely has the money for UMG, then – but European regulatory approval is another matter.
Speaking to MBW, Helen Smith (pictured main), Executive Chair of Independent music trade body IMPALA, has said that any attempted sale of UMG to Google would be blocked “because of the impact in both the digital market and the music sector”.
Furthermore, argued Smith, speaking at the IMPALA board meeting on Friday, April 5, “none of the possible purchasers of Universal [Music Group] mentioned so far would secure regulatory approval”.
Other “possible purchasers” include Chinese media giant Tencent and global investments group KKR, who, according to Reuters sources, are both considering acquisition bids for UMG. Other much-mooted potential acquirers including Apple and Liberty Media, majority-owner of Sirius XM and Pandora, and a minority stake holder in Live Nation.
In February, MBW revealed that JPMorgan had valued UMG at $50bn.
Smith argues that Google “could pretty much do what it likes with consumer offers and prices” if it were take control of half or more of UMG’s repertoire adding that “independents and the other majors would be squeezed further and artists would also end up losing out of course”.
“It would be impossible for Google or any company with power in a vertical market to acquire influence over the world’s biggest set of repertoire. The risk of extreme consumer harm from such a transaction would put off any regulator.”
Speaking to MBW, Helen Smith said: “It would be impossible for Google or any company with power in a vertical market to acquire influence over the world’s biggest set of repertoire. The risk of extreme consumer harm from such a transaction would put off any regulator.
“Having already been fined over €8bn for messing around in the online search market, it’s unlikely that the EU would trust Google to behave itself here.
“It would be blocked because of the impact in both the digital market and the music sector. One digital player would control half of its supply, to the detriment of other online services.
“It could pretty much do what it likes with consumer offers and prices, and of course use its algorithms to favour its own catalogue. Independents and the other majors would be squeezed further and artists would also end up losing out of course.
“The EU has spent two decades dismantling vertical controls in other essential markets like energy and communication. It is not about to go into reverse in digital and music.”
The IMPALA board also discussed the impact of Brexit on the creative sector, and called on negotiators to prioritize “sector specific deals”.
Said Smith: “The relationship between the UK and the rest of Europe is vital for the whole music market.
“With the ongoing uncertainty and fatigue that surrounds Brexit, it is vital we double our efforts to ensure that sector specific deals remain possible. The voice of the cultural and creative sectors must be heard.”Music Business Worldwide