Back in September of 2021, the UK’s Competition and Markets Authority (CMA) expressed “significant” concerns with Sony Music’s $430 million AWAL buyout. Now, the competition watchdog has stated that the deal represents a “relevant merger situation” and won’t result in a “substantial lessening of competition.”
The nine-year-old agency detailed its preliminary approval of the nearly $430 million transaction today, in a 17-page-long “summary of provisional findings.” Sony Music and Kobalt first announced the sale of AWAL (as well as Kobalt Neighboring Rights) around the start of February of 2021.
Then, May saw the CMA unveil its probe into the deal, before voicing the initially disclosed “significant” concerns – and outlining plans for an “in-depth Phase 2 investigation” – in September. Said Phase 2 investigation didn’t cause the CMA to oppose the acquisition (or establish regulatory requirements for its completion), the government agency’s newly published summary has revealed.
Interesting components of the verbose document have been redacted from the public version – including but not limited to AWAL’s 2020 revenue, Sony’s view of why AWAL “faced an uncertain future,” and more. But the CMA made clear its belief that the purchase won’t bring about a loss of competition in artist/label services or “in the supply of high-touch services to artists.”
“Having considered the evidence in the round, we have provisionally found that The Orchard and AWAL do not currently compete closely in the provision of A&L services, due to their different areas of focus on label and artist services respectively and due to the constraints from other competitors,” the document states on the former front.
Moreover, competition from entities including Downtown’s FUGA, WMG’S ADA, Ingrooves, Believe, and PIAS will “discipline the commercial behaviour of the Parties post-Merger,” per the CMA. Regarding “high-touch” artist services – marketing, tour support, and distribution among them – AWAL Recordings would likely have offered “a credible alternative, for some artists, to a major label deal” in the absence of the SME buyout, thereby continuing to serve as a “competitive constraint.”
“However, its business model faced some challenges regarding its sustainability given the relatively short period over which AWAL Recordings is able to earn a return on its investments, given it does not retain ownership of copyright beyond the end of contracts,” the text proceeds. “Indeed, there is some evidence that AWAL Recordings’ offering was becoming more like that of its competitors in its deal terms.”
And after emphasizing the market presence of BMG, Beggars Group, and others, the resource reiterates the CMA’s stance on the competitive implications (or lack thereof) of the deal. “Any parties” have until 5 PM local time on Friday, March 4th, to weigh in on the report, the competition watchdog stated.
Representatives of the UK’s independent music industry have already addressed the major labels’ latest effort to eliminate competition, though. The Association of Independent Music, for instance, reached out to DMN with a statement from CEO Paul Pacifico.
“Whilst the CMA has ruled that AWAL’s acquisition is not enough to substantially reduce competition by itself, it is part of a pattern that threatens to gradually erode competition and diversity in UK music if independent entrepreneurs continue without much-needed access to capital,” said Pacifico.
“Sony arguing that even a hugely successful independent like AWAL would have struggled to maintain its position alone highlights the sector’s need for better support to scale-up. Without pathways for growth for independent entrepreneurs, we can expect to see a gradual erosion of competition across the sector, damaging innovation, diversity and leading to less favourable conditions for artists,” concluded the English National Ballet board trustee.
??As D.I.Y. independent creators gain grounds for the first time in over 30 years, #SONY is right there to buy up and limit – and control the curve. Why ? Because we’ve proven we can do the same work for a fraction of the cost, and as always the CEO’s who really don’t know music, rely on innovative free thinkers for then to bottom feed off. They admit.. it takes money to survive the music industry. Too bad Canada allows 38 Performing Rights Organizations to get their greasy hands on our money first. ??
Sony arguing that even a hugely successful independent like AWAL would have struggled to maintain its position alone highlights the sector’s need for better support to scale-up. Without pathways for growth for independent entrepreneurs, we can expect to see a gradual erosion of competition across the sector, damaging innovation, diversity and leading to less favourable conditions for artists,” concluded the English National Ballet board trustee.