Small Business

EU Moves Closer to Major Record-Label Dominance

Barry Neild, GlobalPost

Remember the grungy record-store dude who mocked your music choice before insisting you spend your hard-earned cash on an obscure noise band?

He may now wear a suit and work in Brussels.

Okay, British vinyl vendors aren't exactly jumping on planes to Belgium. But there are some who fear that by consenting this month to a seismic shakeup of the music industry, European legislators could soon have as much impact on what we listen to as a grumpy dude in a Sonic Youth T-shirt.

For defenders of the independent music scene, the deal represents an escalation in major label hostilities at a time when revenues are also threatened by piracy and online pricing.

At the heart of the deal is EMI, a venerable British music company that has found itself in financial trouble despite a catalog of hit records and a roster that includes Katy Perry, Coldplay and Snoop Dogg.

Last year, EMI was taken over by major creditor Citigroup , which decided to divide it up and sell to the highest bidders. Vivendi-owned Universal Music offered $1.9 billion for EMI's recorded music business, and a Sony/ATV-led consortium agreed to pay $2.2 billion for its music publishing unit.

Competition regulators immediately blocked the deal, concerned that the acquisitions would allow Sony and Universal to dominate the music market.

But last week, the European Commission set things in motion again, green-lighting the Sony-led consortium after it promised to sell off a slice of EMI's UK-based catalogs to reduce its control of the UK and Ireland markets.

Further approval is needed in the U.S., Australia and Brazil, but European assent was seen as the key stumbling block. Universal Music, meanwhile, faces a further EU probe, expected to last until September.

So far so good for Sony/ATV.

For fans, artists and the industry as a whole, not so good, according to Impala, an organization that represents Europe's independent music sector.

"We remain convinced that the impact of this merger on the livelihood of [musicians] has been underestimated, while the ability of the remedies to secure future competition has been overestimated," Helen Smith, Impala's executive chair, said in a statement.

Separately, Smith told GlobalPost that an immediate announcement of job losses at EMI and Sony was merely the beginning of a downward spiral that will eventually hit consumers.

"First, many authors currently signed will be axed or put on ice," she said. "This is inevitable, because if you don't do that you can't make $70 million savings in staff."

This, she says, will give new music authors fewer career options and less power to negotiate. "With more and more focus on Anglo-American repertoire, the net result for music fans will be less choice and diversity."

Helienne Lindvall, a professional songwriter and musician, paints a similar picture, warning that if the Universal deal also goes through, major labels will have so much power that there will be little room for the independent labels and operators who nurture non-mainstream acts.

She cites Martin Mills, founder and CEO of Beggars Group, Europe’s biggest indie label, who recently argued that “edgy” artists like Elvis or Britpop band Oasis would have been ignored in the kind of "lowest common-denominator music market" that the Universal deal would create.

“Universal will be able to use its leverage to get its artists on to TV shows,” said Lindvall. “For example, if you want Madonna on your show, you will have to get one of the label’s new signings on your next show. So they can occupy even more the media space.”

Major label dominance will also squeeze independents out of the digital marketplace, Lindvall said. With the clout to negotiate huge advances from online vendors and streaming services such as Spotify, the majors will leave little revenue to be shared among the indies.

“They can basically hold these services hostage, and there's very little money left on the table for whoever comes in next. This becomes self-perpetuating. The less money the independents get, the less money they have to invest in artists who might not be the cup of tea of a major label — and so we're going to get less of those left-field artists.”

While major labels may have exerted a stifling effect on digital innovation beyond outlets such as Spotify, iTunes or Amazon , Mark Mulligan, an analyst and music-industry blogger, argued that the sale of EMI will not necessarily reshape the traditional business landscape any further. Consumers, he adds, will not be directly affected.

He said some criticism of major labels was valid, but since market consolidation has been going on for much of the last decade, the independent sector has had adequate opportunity to adapt and increase its share of the industry, but failed to do so.

“Undoubtedly the record industry and the major labels still require monumental change and still require a huge overhaul in the way they do business, yet we're still seeing that artists are choosing to sign with the major labels to the same degree they used to.

“Ultimately it's an artist’s choice who they sign with. An artist will typically sign to a major label because a major will give them bigger budget, more scale, more contacts, a bigger chance of success and to crack the big league.

“And I don’t think from an artist's perspective it's going to get dramatically different.”