Indie labels fear music-publishing powerhouse

Independent music labels have criticised the decision on Tuesday (22 May) by Competition Commissioner Neelie Kroes to give clearance to Universal Music’s €1.63 billion bid for the publishing arm of German media group Bertelsmann.

They fear that the soon-to-be-formed publishing powerhouse could squeeze smaller competitors out of the market and lead to a homogenisation of Europe’s cultural landscape.

The merger will create the world’s largest music publisher. Central to the concerns of the ‘indies’, operating outside the ‘big four’ media groups of EMI, Sony BMG, Universal and Warner, are the potential abuses that could arise from the ‘bundling‘ of recording and publishing activities in the new entity. "The affiliation has been there since time immemorial," said Jeremy Lascelles, chief executive of Chrysalis Music. "But, there is potential for abuse where publishing and recording rights are put together, squeezing all competitors out of the market when it comes to licensing issues."

Of the four dominant media conglomerates, Sony BMG is the only entity that does not have a publishing division handling and controlling the rights to songs. Prior to the creation of the company from the marriage of Sony and Bertelsmann (BMG) in 2004, the publishing units of both companies were sold off to address the concerns of EU antitrust regulators. Sony BMG, which had to re-submit a merger application to the European Commission last year after the latter’s 2004 clearance decision was overturned by the European Court of Justice, is said to be planning a return to the publishing market.

While acknowledging the threats posed by the majors’ joint publishing and recording activities, one Brussels-based lawyer deemed it unlikely that industry worries will be realised. "I think nobody who is close to the industry thinks there would be a problem," he says. "The general view is that having a market share in publishing does not give market power because the bulk of licensing decisions and rates are set by collecting societies."

Some independents also fear that publishers could start using their ownership of rights to songs as a bargaining tool to persuade artists to record their music in the same group. Calls by Impala, the independent labels’ lobby, for the Commission to impose behavioural remedies as a pre-condition for the merger went unheeded. "The problem with behavioural remedies is that they are so difficult to verify," said one Commission official.

Universal’s proposal to sell major assets, such as its valuable Rondor catalogue featuring songs by UK act the Kaiser Chiefs, was welcomed by many independents as a suitable pre-merger concession. But, Lascelles says that, in any case, the multi-million sell-offs will change little. "The divestments are all fine and well, but if they are only sold to other majors what good is that to anyone? It does not help the independent sector, it does not make for a dynamic market," he said.

Independents are now left wondering just how much the Commission has learnt from last year’s ECJ ruling overturning 2004’s clearance of the Sony BMG merger. The Brussels lawyer maintains that the the ECJ ruling influenced the Commission’s decision to delay its decision on Universal’s bid for BMG Music Publishing by two months for a second phase of investigations.

"I guess that after the criticism over Sony BMG, they were being very cautious," he said. "This could have been cleared in the first phase, but they wanted to show that they had asked all the questions and weighed all the evidence."

Lascelles is unconvinced that regulators’ apparent scrutiny has fostered a greater understanding of the music business. "Competitive markets will promote a broader cultural landscape," he says. "When you have dominant players muscling their way through, they tend to go for the lowest common denominator, the easy commercial cure. You need competition from independents for less mainstream artists to prosper and thrive."

Independent music labels have criticised the decision on Tuesday (22 May) by Competition Commissioner Neelie Kroes to give clearance to Universal Music’s €1.63 billion bid for the publishing arm of German media group Bertelsmann.