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Universal Music, EMI seek merger OK

Combined share of market, at 40%, would overshadow Sony, Warner

- The Washington Times - Thursday, June 21, 2012

What do pop-music rivals Rihanna and Katy Perry have in common? Well, they could be working for the same team if a merger between their parent companies, Universal Music Group and EMI, gains approval from U.S. and European regulators.

The merger's major backer, Universal Music Group CEO Lucian Grainge, has negotiated a $1.9 billion deal to purchase EMI from Citigroup.

The possibility that the Big Four music firms could soon become the Big Three has consumer advocates worried.

Universal Music Group already controls 30 percent of the market, and the acquisition of EMI could bump it to 40 percent - well ahead of nearest rival Sony, at 30 percent, and Warner at 19 percent, according to industry data from Nielsen SoundScan.

Lawmakers on the Senate's Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights made their voices heard yesterday as they questioned both supporters and opponents of the merger.

Chairman Herb Kohl, Wisconsin Democrat, seemed skeptical, noting the negative effects the proposed merger could have on independent labels and prices for consumers.

But Mr. Grainge argued that the music industry had changed dramatically over the past decade as power shifted away from record companies to online music giants such as iTunes, Amazon and Spotify.

The changes have made the industry's traditional problems with price fixing and market concentration a thing of the past, he said.

"We are absolutely committed to investing in EMI as a distinct business that can help us develop even more music and choice for consumers and fans everywhere," Mr. Grainge said.

Roger Faxon, CEO of EMI, also testified in support of the merger. He told lawmakers that with Apple and Amazon accounting for 90 percent of sales and 80 percent of total digital revenues, record companies are in no position to manipulate the market.

"In this environment, pricing does not sit within the gift of record companies, regardless of size or market position," he said.

Gigi Sohn, president of Public Knowledge, a Washington-based public interest group, was unconvinced.

She disputed the claims that the music industry titans were victims of a changing market and therefore deserving of a special exemption. The merger, she said, would lead to "less competition, stifled innovation, and high prices."

Ultimately the Federal Trade Commission will decide if the merger passes antitrust muster, a decision still forthcoming.

The European Commission already has expressed concern that the merger could adequately impact the market in a way that will hurt consumers and intends to file an antitrust complaint.

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