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EU Approves Vivendi Universal's Buy of BMG Unit

Vivendi's Universal Music won conditional approval from the European Commission on Tuesday to buy BMG Music Publishing for 1.63 billion euros ($2.19 billion), making it the world's largest music publisher.

"The Commission found that the proposed merger, as initially notified, raised serious doubts as regards adverse effects on competition in the market for music publishing rights for online applications," the European Union's executive said.

"However, the Commission's investigation found that these concerns would be removed by the remedies package proposed by the parties concerning the divestiture of a number of publishing catalogues," it said in a statement.

Vivendi overcame opposition from independent music publishing group Impala, which had convinced a court to annul the Commission's approval of a merger of two music producers.

"We are delighted that the European Commission has approved our acquisition of BMG Music Publishing," said Doug Morris, chairman and chief executive of Universal Music Group.

Under the approval on Tuesday, Universal will have access to thousands of song rights of BMG Music Publishing, including artists such as Coldplay, Christina Aguilera and Barry Manilow.

Universal has committed to divest a number of important catalogues, covering Anglo-American copyrights and contracts with authors, catalogues containing successful artists such as the Kaiser Chiefs, Justin Timberlake and R. Kelly, the Commission said.

Universal will divest the rights within the 30-member European Economic Area, which includes the European Union.

The catalogues to be divested are Zomba U.K., 19 Music, 19 Songs, BBC music publishing, Rondor U.K. as well as an EEA license for the catalogue of Zomba U.S.

Market Shift

The Commission said the divestitures were designed to deal with a shift in the market. In the past, rights were licensed through a collecting societies system operating in individual countries.

But the market has shifted to EEA-wide licenses, a move supported by the European Commission.

The Commission said it had been concerned that Universal would have "the ability and the incentive to increase prices for online rights as regards Anglo-American repertoires."

In several countries, Universal would control more than half of the chart hits and become a "must have" for online and mobile music services, the Commission said.

"Possibilities to circumvent Universal would be significantly reduced by the merger," the Commission said.

Publishers have been increasingly coveted because they are shielded by some of the piracy issues that have rattled the music industry.

In addition to generating revenue when CDs or downloads are sold, publishers make money by licensing songs to be performed live and for use in films and television shows.

The deal was opposed by Impala, a group that represents 3,500 independent labels and music publishers, which said the takeover would consolidate power in the industry into few hands and thus impede competition.

Impala's challenge of Commission approval for a merger that created Sony BMG, a recorded music joint venture between Sony Music and Bertelsmann's BMG, led the Court of First Instance to annul the Commission's decision.

The Commission has reconsidered the Sony-Bertelsmann deal, but suspended its review on March 23 pending additional information from the companies.

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