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EMI, WMG eye Sony BMG ruling
As the two labels vie to acquire one another, clues could come in tomorrow's European court ruling, regardless if the court decides to undo the merger or not.
LONDON--A European court is set to rule on Thursday whether to undo the 2004 merger of Sony Music and BMG, in a decision being closely watched for implications on possible further industry consolidation by EMI Group and Warner Music.
Impala reps the White Stripes.
Claims by independent record companies that the creation of Sony BMG should be disallowed for antitrust reasons are not expected by music-sector executives or attorneys to be supported by The European Court of First Instance.
Just what Europe's second-highest court says in its ruling, however, could yield some hints to EMI Group and Warner Music about whether their ongoing duel to buy each other would be acceptable to regulators should they manage to strike an agreement.
"It seems difficult at this juncture to see how the Sony BMG merger could be unbundled...but the wording the court uses will be extremely important," said Ben Challis, a music attorney and editor of the Music Law Updates Web site.
"If, for example, the court is critical of the EC's decision, or even its decision-making process," he said, "this could be a major hurdle for any potential Warner-EMI tie-up."
Impala, the trade group for independent record companies, filed its appeal against the Sony BMG deal in November 2004, and in May spoke out against any combination of EMI and Warner, the world's third- and fourth-largest music companies, respectively.
"We are looking for the court to deal with Sony BMG and the issues that we raised, but clearly whatever the outcome, there will be implications for any concentration, be it Sony BMG or any future merger," an Impala spokeswoman said.
The European Commission approved the deal to create Sony BMG, a 50-50 joint venture between Japanese electronics giant Sony and German media conglomerate Bertelsmann AG, in July 2004, overcoming its early suspicion of tacit price collusion among the major music companies.
"The Commission will keep a close watch on the music sector as it becomes even more concentrated and would very carefully scrutinise any further major concentration in the industry," EC officials said at the time of the Sony BMG approval.
Along with Vivendi's Universal Music, the world's biggest music company, Sony BMG, EMI, and Warner together account for about three out of every four CDs sold around the world.
Impala, whose members represent such artists as Franz Ferdinand and The White Stripes, said that allowing the music industry to shrink from five major companies to four marginalized the independent sector and cost it market share.
If Warner Music or EMI were to merge--each has offered about $4.6 billion to buy the other, with both bids rejected--it would leave three dominant players.
"If three companies have a market share of 75 percent, they can effectively dictate their terms to 100 percent of the marketplace," Hein van der Ree, managing director of Epitaph Europe, an Impala member, said earlier this year.
"I don't see how that can be acceptable to anyone interested in ensuring market access to all players, large and small."
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