[Post authored by FMC Policy Fellow Daniel Lieberman]

Last week, Universal Music’s bid to takeover EMI Music went before European antitrust regulators, who will rule this September on a merger that would further consolidate the major record label system. If you are just tuning in, EMI is the crown jewel of the United Kingdom’s music catalog, home to classic recordings by the Beatles, Pink Floyd, David Bowie, and more contemporary releases by the Beastie Boys, LCD Soundsystem and Norah Jones. Further background on this merger is available here.

Despite the compromised state of the record industry — its business has been more than cut in half over the past decade — public interest groups have raised concerns over a union between Universal Music (UMG) and EMI Music (EMI). The focus of the anxiety is the potential market dominance of a combined UMG-EMI, a sizeable record label that could singularly handicap development of and access to music platforms of the future.

As FMC Deputy Director Casey Rae advised the Senate this June, “we could see a vibrant ecosystem of creative expression and innovation compromised by just a couple companies with tremendous leverage over which platforms are allowed to exist and how they function.”

These initial warnings seem to have resonated with EU antitrust officials, artists, and UMG itself, who proposed several concessions (or “divestments” in antitrust speak) that could make the joint venture more palatable for everyone involved —indie music labels, content startups, and consumers alike. As Ben Sisario of The New York Times reported, Universal head Lucian Grange offered to break off key EMI assets and sell them to indie labels.  Such assets may include music catalogs from Virgin, Mute, and Chrysalis.  At first blush, this move may seem altruistic.  This catalog sharing, however, would only affect the EU, leaving a future UMG-EMI label untouched in the US, the world’s largest music market.  Additionally, Universal has also made financing help available to indie labels like Impala to buy the catalogs at issue, likely to avoid these lucrative music assets falling into the hands of its chief competition — Sony and Warner.

Amidst this talk of corporate catalogs, competition, and concessions, we hope that antitrust officials in the EU and the US will remember to place artists and consumers on equal standing in this long, often confusing process. 

For starters, the corporatization of record labels can have a profound effect on the lives of the artists making the music.  The fallout of corporate mergers is that artists can find themselves in a new musical home, one, which they never anticipated or desired.  This was the case in 2007 when Terra Firma — a UK private equity firm — bought EMI and Radiohead, suspicious of a financial company’s ability to curate music, decided not to renew their record label contract. Although Radiohead had more than fifteen years of record label support prior to their separation with EMI, they never signed up to have their body of work controlled by a company who probably knows its way around Wall Street better than Exile on Main Street.

Next, more of the music merger conversation must focus on artist rights and artist cultivation.  Herein lies the rub.  How can we ensure a better shake for artists and therefore, better music for all of us consumers?  The Featured Artists Coalition (FAC) — led by Pink Floyd’s Nick Mason, Radiohead’s Ed Greenwood, and singer Sandie Shaw — argue that before mergers like UMG-EMI occur, artists should be able to buy back their copyrights at market rates.  Despite the inherent difficulty of assesing the art both in the present and the future, the proposition underscores a point deftly noted by FAC, which stated, “It would be good to have music business people rather than financiers owning and running music companies again.”

Finally, at the risk of sounding self-aggrandizing, EU antitrust officials in September must soberly consider the future of music. As major labels contract and are forced to shy away from their former role of artist development, these regulators must question whether there is an adequate mechanism to ensure that the next Bob Dylan, Prince or Adele gets the support, investment, and promotion required. 

In 2001, Canada admirably tackled this issue when concerns of consolidation were presented to its radio and recording industries.  Canada’s solution was the Radio Starmaker Fund, an investment vehicle created solely to back the careers of up and coming musicians who receive funding after a competitive application process.  To date, the Radio Starmaker Fund has provided $35 million in support of Canadian music.

So what artists has Radio Starmaker backed?  To name a few — Metric, Broken Social Scene, Feist, Stars, MSTRKRFT, Tegan & Sara, The New Pornographers and K’Naan (yes, the artist who penned the global anthem to the 2010 World Cup). 

As we have said time and again, consolidation and a decline in ownership diversity, whether in radio broadcasting, live venues & ticketing, or record labels, invariably results in worse conditions for artists and consumers. So if everyone in this merger process is genuinely concerned with the health of the music industry and the artists that underpin it, perhaps mandatory donations to a culture fund like Radio Starmaker should be part of regulators’ calculus as they consider divestments like those put forth by UMG.  Check our additional coverage of the merger here.

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