Market consolidation
IMPALA’s aim is to keep the market as open and as competitive as possible for the independent sector.
This means keeping an eye on what’s happening across the market, including with consolidation as that squeezes the independents further in an already very concentrated market and also impacts key markets such as digital.
We also raise red flags over other practices which hamper competition and we promote new ways of looking at competition issues in key strategic markets such as music which have their own specificities.
IMPALA has an impressive record on competition cases in the music sector. The first EMI/Warner merger was withdrawn in 2001 following objections from the EU after IMPALA intervened, in its first year of existence. It also won a landmark judgment in 2006 in the Sony/BMG case, and when Sony acquired 30% of EMI publishing in 2012, it was at the cost of significant divestments. The biggest set of remedies proportionately ever in a merger case was secured later that year, when UMG was forced to sell two thirds of EMI records and had to accept ten years of scrutiny over the terms of its digital deals. When WMG bought Parlophone in 2013, IMPALA secured a hefty divestments package for its members. IMPALA also represented the independents in the various Sony/EMI merger cases from 2012 to 2018, where the EU ultimately approved the acquisition based on remedies Sony agreed in 2012. In the UK, we also contributed to the CMA’ investigation into the SONY/AWAL merger here as well as raise concerns about other strategic acquisitions.
Acquisition of key independent players is also happening in key national markets across the globe. Sony bought Som Livre, Brazil’s biggest independent music company, in a deal that increased Sony’s power significantly in the region and as well as with digital players as brazil is one of the worlds’s leading digital markets. This inevitably impacts Europe given the importance of Som Livre’s repertoire worldwide as well as the strategic significance of this deal. In the same year Sony also acquired the music catalog of the Mexican independent regional label and management company, Remex Music, for an undisclosed fee.
UMG has sold 20% of its shares to Chinese tech giant Tencent. In addition, Tencent Music Entertainment also took a stake in UMG’s China operations and we understand negotiations continue with both Tencent and other potential purchasers. UMG also confirmed its plan to do an IPO in September 2021. In parallel, in China, the competition regulator started to become critical of Tencent’s exclusivity deals and ordered Tencent to relinquish any exclusivity rights it still has over music catalogue. (See more in the members note below).
Other market developments have also been flagged by IMPALA as a risk, including Spotify’s move to reduce royalty rates in return for alogrithmic plays, which IMPALA and others in the sector have described as basic pay for play, payola as it is know when it comes to traditional radio players (see point 9 of IMPALA’s 10 point plan on streaming, revisited in April 2023, two years after the release of our initial plan).
IMPALA was invited to contribute to the UK enquiry into streaming and this was the opportunity to flag our views on issues such as consolidation, vertical integration, etc. See our full response to their statement of scope here. The CMA published their first findings and recommendations, which we also commented on.