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Wed 4 Apr 2012 10:00 AM

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Gulf-backed music mergers strike wrong chord - lobbyists

Opponents of plans to merge EMI and Universal say it will lead to prices rising

Gulf-backed music mergers strike wrong chord - lobbyists
Mubadala is part of a bid to acquire EMIs music publishing business.

Gulf-backed plans to merge some of the world’s biggest music companies will reduce competition in the market and will be bad for musicians, retailers and fans, a lobbyist group for independent music companies told Arabian Business in an interview.

The European Commission is currently investigating whether Universal Music, which is part owned by Qatar’s sovereign wealth fund and is currently the world’s largest record company, will be allowed to buy its UK-based rival EMI's recorded music unit for US$1.9bn.

At the same time, a Sony Music Group-led plan, which includes Abu Dhabi’s Mubadala Development Company, to acquire EMI's music publishing business for US$2.2bn is also seeking approval from the EU.

Critics claim the move will reduce competition in the market by creating the world’s largest music provider and with have a negative impact on musicians and artists.

“It would create in effect a bigger duopoly between Universal and Sony, who would control music publishing and music recording worldwide. Neither their much smaller nearest market rival [Warner Music] nor the independents who are fragmented, would be able to provide effective competition,” said Helen Smith, executive chair of the Independent Music Companies Association (Impala), a lobbying group for independent music companies which has urged EU regulators to block both deals.

Smith is also concerned the deals will lead to prices increasing for consumers: “The risk of higher prices makes regulators nervous and they are having serious doubts as to whether this level of consolidation is acceptable.”

A questionnaire sent to the European Commission and seen by Reuters asked whether artists would be able to switch record labels easily and at a reasonable cost once the two deals were completed.

“The impact of these mergers on artists is significant as their power will be reduced. Universal and Sony will get free pick of the artists… It is damaging and not in the public interest to reduce career options for musicians and others involved in the business who would like to make a living and write great hits. The public will end up with less choice.

“[Artists] will find it more difficult to make a living, to get the best radio or TV slots, or get into the charts, or headline festivals, or make it onto the covers of magazines… unless they are signed to Universal or Sony.

“It would basically mean you would have two companies deciding which artists are suitable for our children to listen to tomorrow and that is not the kind of message the regulators want to give,” Smith added.

A verdict by the European Commission on the mergers is due in August.

“The proposed acquisition of EMI Music publishing by Sony and an investor group including Mubadala has been notified to the European Commission. The parties will continue to engage constructively with the Commission and are confident that the transaction will be approved,” a Mubadala spokesperson told Arabian Business in a statement.

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