EU approves sale of EMI to Universal

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The Beatles perform in 1964.The European Union has OK'd the sale of their catalogue to Universal. (THE ASSOCIATED PRESS ARCHIVES)

BRUSSELS, Belgium -- Universal Music Group got approval Friday from American and European regulators to buy the famed British music company EMI, including the hugely lucrative Beatles catalogue. But the EU imposed stringent restrictions on the deal, forcing Universal to sell some of EMI's biggest acts, such as Coldplay and Pink Floyd.

Among EMI's assets that must go is Parlophone, home to those two British bands as well as Kylie Minogue and David Bowie. The Beatles, part of Parlophone, were exempted.

Universal will also have to sell off EMI's classical music divisions, its French and other local branches and labels that are home to Depeche Mode and The Ramones.

The U.S. Federal Trade Commission said Universal and EMI's businesses were different enough from each other that the deal wasn't anti-competitive. It added it didn't see the need to impose the same conditions on the deal as European regulators because of the differences between the U.S. and European markets.

EU Competition Commissioner Joaquin Almunia said the fact that the companies involved trade in music made the case a particularly emotional one.

"This has been one of the most difficult discussions in my life as commissioner for competition because of... the existence not only of an industry -- we are used to dealing with mergers between companies in very different sectors -- but the existence of a cultural dimension," Almunia said.

The FTC's decision was the last hurdle Universal, which already represents Jay-Z, Nirvana and U2, had to clear before it can go ahead with its $1.9-billion purchase of EMI's recorded-music division, where talent is nurtured.

Universal's rivals, including Warner Music and small independent labels, have protested the deal, saying it could squeeze out other players.

"This decision has finally put a freeze on Universal's ability to expand further," Helen Smith, executive chair of Impala, an industry group for independent labels, said in a statement Friday. "However, this decision nonetheless reinforces what is already a powerful duopoly."

The Universal deal is one part of the breakup of EMI. Regulators have already allowed a group led by Sony Corp. to buy EMI's music-publishing arm for $2.2 billion.

If the Universal deal goes through, its average market share in European countries will be less than 40 per cent after the asset sales, Almunia said.

Simon Dyson, the editor of Music & Copyright, an industry newsletter, said it appeared Universal's global market share would rise from around 29 per cent to 34.5 per cent -- but because the company was already such a big player, the acquisition was unlikely to drastically change the industry.

"A digital music service can't launch without a company that's got one-third of the world's music, but it also can't launch without a company that has one-quarter," he said. "I genuinely don't see this as big a deal as some of the critics."

Still, if the U.S. also approves the deal, it will mean the number of major record labels drops from four to three.

Almunia said that was a concern for European regulators, and they are trying to remedy it by insisting Universal sell about two-thirds of the assets they're getting rid of to one buyer, in the hopes of creating another significant player in the music business -- even if it won't be as large as the old EMI, which was already the smallest of the four "majors."

He hinted the EU wouldn't want to see Warner or Sony buy that chunk, although he said it was up to Universal to decide to whom they wanted to sell.

Universal welcomed the announcement, brushing off suggestions it is being forced to sell so much of EMI the deal might not make sense anymore.

"We are delighted Universal Music will retain over two-thirds of EMI on a global basis, contributing to the accretive nature of the deal," the company said in a statement.

The company noted it is acquiring several iconic artists, particularly the Beatles collection. Almunia said the British sensations' songs were exempted from the Parlophone sale because companies themselves propose asset sales in competition negotiations. The regulator can only approve or deny the proposal; it does not make its own recommendations for what should be sold off.

Dyson agreed even with the asset sales, Universal did pretty well.

"They've got arguably the two biggest bands in history -- the Beatles and the Rolling Stones," he said. "That's nothing to sniff at."

-- The Associated Press

Republished from the Winnipeg Free Press print edition September 22, 2012 B9