IMPALA is in touch with competition regulators in multiple “key jurisdictions” in relation to Universal Music’s acquisition of Downtown Music Holdings, the pan-European indie label trade group announced today, with IMPALA boss Helen Smith saying “we need to press the pause button”.
The organisation has also renewed its plea for regulators to block the deal, telling them that Universal’s “juggernaut strategy” is “crushing everything in its path” and needs to end.
Downtown and its various subsidiaries, including FUGA, Songtrust and CD Baby, play a key role in the digital supply chain for thousands of independent music businesses and hundreds of thousands of artists. With the Downtown deal, these companies will become part of Universal, which is not only the biggest music rights company in the world but already controls significant chunks of the music industry’s supply chain.
The renewed call for regulatory intervention has been timed to coincide with tomorrow’s BRIT Awards. The music industry’s big award events, says Smith, are “a perfect moment to celebrate diversity” in the music industry, but also a time to reflect on “all the labels and artists that could struggle to reach the public in the future” if Universal’s Downtown deal is not stopped.
The last big Universal Music acquisition to prompt regulatory intervention was its 2012 acquisition of the EMI record company. While that deal was about expanding the major’s ownership of catalogue and, as a result, market share – a critical metric in the streaming economy – this deal is about access to market and data, because of Downtown’s key role in the digital supply chain.
Crucial infrastructure will come under Universal’s control, giving it huge insight into how people are engaging with catalogue that it does not own or control.
“A thriving music market needs effective competition and plenty of routes to market for labels and artists”, Smith adds. But Universal Music “is planning the exact opposite because they want to control access to the market. The two other music majors, Sony and Warner, are also buying up music businesses in key markets”. With “far fewer options”, she adds, “many labels and artists are going to be shut out”.
Universal has been able to use its dominant position in terms of catalogue size and market share to put pressure on the streaming services to alter the way they allocate royalties in a way that benefits Universal and its shareholders. Changes that the major then sneakily brands as “artist-centric”, despite excluding artists – and indeed most labels – from any conversations regarding the evolution of a business model that the entire industry then has to work with.
By acquiring the Downtown group – and therefore ultimately controlling the rights of artists, labels, songwriters and publishers that utilise the distribution and administration services of Downtown, FUGA, Songtrust and CD Baby – that market dominance, and accompanying power to force self-serving changes to the streaming business model, will only increase.
However, the access to market and data ramifications are bigger. Many labels that utilise streaming deals negotiated by digital licensing agency Merlin rely on FUGA to deliver their content. Some independent distributors also utilise the FUGA infrastructure. Other indies use Downtown-owned royalties platform Curve to manage royalty payments. The Downtown deal, therefore, means countless independent music businesses will see their content and data start to move through Universal-owned networks.
Honing in on the access point, IMPALA Chair Dario Draštata says: “All markets need big companies, but the music market is experiencing a level of concentration that would not be tolerated in any other market. Independent labels and artists should not depend on their competitors for access”.
Smith calls on regulators to properly scrutinise the access to market concerns. “This is like shining a light in the basement of a four-storey building to discover that the owner of the first and second floor owns the pipes and wiring and the lifts”, she continues, adding “they control the whole structure”.
To that end, “you need to switch on all the lights to understand how the sector works”, and the full effect of the Downtown deal – coupled with Universal’s recent acquisition of [PIAS] – “in the context of a market leader with interests at all levels of the music ecosystem”.
Universal has also been criticised for presenting the Downtown acquisition as being a pro-indie deal driven by its label services division Virgin Music – a brand some still associate with the independent sector because of the origins of Virgin Records.
It has also tried to position the transaction as a US-based deal – presumably because European regulators are more likely to intervene – despite FUGA being a key player in the European market and a business with significant operations in the Netherlands, where it was founded and where Universal Music Group NV, the legal entity of Universal, is also domiciled.
Smith says Universal’s claims that the businesses it is acquiring are still “independent” is “misleading and unfair competition”, while Draštata adds, “We look to regulators to see through the ‘indie washing’ and take action”.