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Mergers: Commission approves Universal’s proposed takeover of BMG's music publishing business, subject to commitments

European Commission - IP/07/695   22/05/2007

Other available languages: FR DE

IP/07/695

Brussels, 22nd May 2007

Mergers: Commission approves Universal’s proposed takeover of BMG's music publishing business, subject to commitments

The European Commission has approved under the EU Merger Regulation the proposed acquisition of the music publishing business of Bertelsmann Music Group (BMG) of Germany by the US-based Universal. The Commission found that the proposed merger, as initially notified, raised serious doubts as regards adverse effects on competition in the market for music publishing rights for online applications. However, the Commission's investigation found that these concerns would be removed by the remedies package proposed by the parties concerning the divestiture of a number of publishing catalogues. In the light of these commitments, the Commission has concluded that the proposed operation would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Competition Commissioner Neelie Kroes said "Digital music has the potential to change the face of the music industry in Europe. I am satisfied that the significant remedies will keep these markets competitive and ensure that consumers will not be harmed by the merger."

Universal, a US-based company owned by the French company Vivendi, is a leading player in the music recording and music publishing business. Universal proposes to acquire the worldwide music publishing activities of BMG, a subsidiary of the German media company Bertelsmann. Whereas music recording concerns the rights of the record company and the singer in the song performance, music publishing relates to the rights of song writers (authors), i.e. of composers and lyricists.

Music publishers exploit the copyrights of authors by granting licences to users of music. The most common music publishing rights are mechanical rights (e.g. for recorded music), performance rights (e.g. for concerts and TV and radio broadcasting), online rights (e.g. for online music downloading, mobile video streaming and mastertones (clips of songs used in place of ringtones on mobile phones) and synchronisation rights (e.g. for advertisements and film music). For mechanical and performance rights, including rights for the online exploitation of music, collecting societies have traditionally carried out the licensing on behalf of the song writers and their publishers.

The Commission's in-depth market investigation has shown that no competition concerns would arise from the merger where the copyrights are still administered by the collecting societies, who usually charge uniform tariffs for the complete administered repertoire.

However, in the field of online rights, publishers have recently started to withdraw their respective rights for Anglo-American song repertoires from the traditional collecting societies system. They have started to transfer their rights to selected collecting societies acting as agents for individual publishers and granting EEA-wide licences – a possibility which has been reaffirmed by a Commission Recommendation issued in 2005 (see IP/05/1261).

The market investigation has shown that, following these withdrawals, pricing power has shifted from the collecting societies to the publishers.

The Commission's concern was that in this new environment, Universal would after the merger be able to exert control over a large percentage of titles either via its (fully or partly owned) copyrights based on the song-writers' works or via its rights based on the individual recordings. In a number of countries, Universal would even control more than half of the chart hits and thereby become a "must-have" product for all online and mobile music services, whose possibilities to circumvent Universal would be significantly reduced by the merger.

The Commission therefore had concerns that the merger would give Universal the ability and the incentive to increase prices for online rights as regards Anglo-American repertoires.

In order to remove the Commission's concerns, Universal committed to divest a number of important catalogues, covering Anglo-American copyrights and contracts with authors. These catalogues include the EEA-activities of Zomba UK, 19 Music, 19 Songs, BBC music publishing, Rondor UK as well as an EEA licence for the catalogue of Zomba US. These catalogues contain many bestselling titles and several successful authors such as The Kaiser Chiefs, Justin Timberlake and R. Kelly. Although the competition concerns only relate to online rights, for reasons of viability the commitments cover the complete range of copyrights (i.e. also mechanical, performance, synchronisation and print rights). In the light of the quality of the divested catalogues, the Commission concluded that the commitments would remove the competition concerns.

More information on the case will be available at:

http://ec.europa.eu/comm/competition/mergers/cases/index/m88.html#m_4404


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