Sony/ATV + EMI Music Publishing = Slam Dunk? Not so fast, says European indie consortium Impala.
Sony/ATV Music Publishing’s ambitious move to acquire a controlling interest in EMI Music Publishing could face a giant regulatory hurdle. And leading the charge is a veritable indie pit bull, Impala. The European organization is renowned for policing mega-deals in the music space, and certain to create some static around this one.
For those just tuning in, here are the details of Sony’s proposed purchase. The skinny: Sony/ATV owner Sony Corp. has just offered $2.3 billion to purchase Mubadala Investment Company 60% equity stake in EMI Music Publishing. The deal would make Sony a 90% controlling owner, with potentially more purchases ahead.
But that’s too much publishing in too few hands, according to Impala.
And regulators on both sides of the Atlantic could slow, block, or otherwise complicate the transaction. “The European Commission will want to avoid reinforcing the Sony/Universal duopoly, the two horse race which started in 2012 with the sale of EMI,” emailed Helen Smith, Executive Chair of Impala.
“This is a step too far and I would expect to see an in-depth investigation in the EU and other key jurisdictions.”
We’re not sure exactly what marketshare this deal would create. But it’s a very large percentage of all publishing assets out there. Indeed, Sony/ATV and EMI Music Publishing would control nearly 4.5 million songs after the deal, and that could create some seriously lopsided leverage.
“Today, Sony is already by far the world’s largest music publisher and an indispensable trading partner controlling over 2.3 million copyrights,” Smith continued. “If this sale was to happen, its market power would be reinforced with serious competition issues, including excessive bargaining power when negotiating with collecting societies and the authors they represent, as well as other actors in the value chains such as labels and online services.”
Impala noted that the remaining 10% of EMI Music Publishing would still be controlled by the Michael Jackson Estate. But even that could be sold in the coming weeks and months, further consolidating the ownership.
Impala pointed a long-term strategy for tricking regulators into approving the EMI buyout.
According to Impala’s claims, Sony realized that regulators were unlikely to approve its intended purchase of EMI Music Publishing back in 2012. So it cobbled together a consortium to win approval, while planning to dismantle that consortium over a period of years. “This confirms the concerns expressed by IMPALA back in 2012 when the European Commission cleared the acquisition of EMI publishing by a consortium including Sony/ATV, and then again in 2016 when the Commission cleared Sony’s move from joint to sole control of Sony/ATV,” the organization continued.
“It shows that ultimately, Sony is taking complete control of EMI publishing, while the initial deal was structured as a consortium to get this bid approved by the regulatory authority.”
Stateside, the deal could play a role in current Music Modernization Act (MMA) deliberations.
Currently, the bill is in the U.S. Senate after receiving a unanimous approval in the House of Representatives. But some sticking points are surfacing, including some measures designed to disproportionately benefit big publishers. That includes the construction of a ‘Mechanical Licensing Collective,’ or MLC, which would largely be overseen by a board representing mega-publishing interests.
That is already leading to a number of possible distortions, including the presence of a narrow, three-year holding period for unmatched mechanical publishing royalties. After that period, all unclaimed royalties go to the largest publishers, calculated by marketshare.
As the largest publisher in the world, the Sony/ATV+EMI mega-publisher will typically receive more than half of those payouts, even though they technically belong to someone else.
“[The Music Modernization Act] establishes that after three years, royalties that go unclaimed get split 50-50 between music publishers and other songwriters – different songwriters than the ones that are due these royalties,” remarked Senator Dianne Feinstein in a recent hearing.
“I’ve heard some estimates that these unclaimed royalties could be as high as hundreds of millions of dollars, so this indeed is a very big deal and requires a good long look.”
Now, it looks like some other governmental entities — particularly those in the EU and US — are also likely to take a’good long look’ at this publishing mega-deal.