Approval of Sony-BMG merger is good news for Warner-EMI deal

From The Times' Law Supplement. October 9th 2007
An interesting article of Dan Sabbagh about the EU-Commission approval for music label mergers.

The Sony and BMG music merger has been approved for the second time by the European Commission in a judgment that, in theory, paves the way for a Warner/EMI merger.
EMI was recently bought by Guy Hands’s Terra Firma private equity group, leading to speculation that he may sell it to Warner.
In a 330-page analysis, the Commission dismissed objections from independent record labels that the reduction of recorded music companies from five to four would lead to tacit price collusion.

Impala, the trade body for independent labels worldwide, said it would ask the European Ombudsman to investigate “potential maladminstration” in a fresh challenge to the deal.
Impala claims that the Commission failed to look at the cultural impacts on “consumer choice and diversity”.
Patrick Zelnick, the president of Impala, said: “The EC [European Commission] has ignored the simple fact that four companies control 95 per cent of the music most citizens hear throughout the world.”
Sony BMG is the world’s second-largest recorded music group, with a share of 21.2 per cent last year behind Vivendi’s Universal at 25.7 per cent, but well ahead of the similarly sized Warner Music and EMI – at 13.8 per cent and 12.8 per cent respectively.
Sony BMG is half-owned by Sony, of Japan, and Bertelsmann, of Germany.
Regulators had to look at the deal again after the European Court of the First Instance struck down the original merger approval in June 2006.
This time the Commission has tried to avoid a repeat by conducting detailed research. Over 14 months it asked all the music majors to supply wholesale prices for its top-selling acts to key retailers in the 15 European member states.
The exercise took in more than 100 million pieces of information.
Given that the original approval for the merger ran to less than 50 pages, Sony BMG hopes that the more detailed work will withstand any legal challenge and allow the company, which has struggled to make the merger to work in practice, a chance to develop.
Neelie Kroes, the Competition Commissioner, said: “This investigation represents one of the most thorough analyses of complex information ever undertaken by the Commission in a merger procedure. It clearly shows that the merger would not raise competition concerns in any of the affected markets.”

–– There is growing expectation that the £8.8 billion Reuters-Thomson merger will go to a second-stage five-month inquiry.
A formal announcement is expected on Monday. The tie-up was always likely to go to a second stage because it involved the reduction of real-time financial information players from three to two.
The market leader is Bloomberg.

Record companies’ global market share
25.7% Universal Music

21.2% Sony BMG

13.8% Warner Music12.8% EMI