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European Commission

Joaquín Almunia

Vice President of the European Commission responsible for Competition Policy

Universal Music Group/EMI Music

Press conference/ Brussels

21 September 2012

Ladies and Gentlemen,

The Commission today approved the acquisition of the recorded-music business of EMI by Universal. This approval is subject to stringent conditions. Universal will have to divest a very significant number of assets, including important music labels that hold the rights of many successful artists.

It was clear since the onset that this merger would deserve close scrutiny for at least three reasons.

First, because this transaction concerns the music sector. Of course recorded music is an industry, but it is also much more. So I paid a lot of attention to the cultural dimension of this merger, and the importance that music has in the lives of citizens.

Second – on a commercial level – because it would bring together two of the so-called major record companies, including the market leader, Universal. After the merger, three majors remain – Universal, Sony and Warner –competing with very many smaller independent labels – the so-called Indies.

Third, because the music business is going digital.

Indeed, the world has changed since the Commission’s latest decision in the recorded music industry in 2007 on Sony and BMG. Consumption has grown in Europe thanks to the new means we can use to buy and listen to music.

In Europe, compact discs still account for the majority of sales, but the sales of digital music are rising and are expected to overtake CDs soon.

So our investigation focussed on this booming digital market, where record companies license their songs to digital platforms such as iTunes and Spotify, or to telecom companies offering music to their clients as part of their subscription packages.

In this environment, the process of innovation and the increased competition in digital music distribution need to be preserved despite the consolidation that is taking place in the market for recorded-music.

This is the context in which we opened our in-depth investigation of the Universal/EMI deal on the 23rd of March.

We wanted to understand what would be the position of Universal in the market as a result of the acquisition, given that, even before, this position was already very strong.

Our investigation showed that the creation of a single Universal – EMI entity, without any sale of assets, would create competition problems both at European level, and in 26 EEA States.

In all these markets, we found that the significant increase in the size of Universal after adding all of EMI's catalogue would allow the company to impose higher prices and more onerous licensing terms on the providers of digital music.

Our investigation showed that even large online music platforms might not be able to entirely avoid a negative price effect from the merger.

But most importantly, smaller market players would be particularly vulnerable to the demands of such a large supplier, which in itself would harm consumers.

All in all, smaller, innovative digital platforms would be forced to pay more for their licences, you and I might end up paying more for our downloads and streams.

In addition, entry in the market of music digital services would become very difficult, while existing innovative platforms would find it hard to expand their services. Consumer choice for digital music would therefore be reduced.

All these concerns were transmitted to Universal in the statement of objections that the team prepared.

In response to our objections, Universal has committed to divest a very significant list of music catalogues and assets.

The company commits to divest EMI Recording Limited, which is home to current hit artists such as Coldplay or David Guetta, among others, and which includes the iconic Parlophone label.

It also holds the rights of other artists and bands that generate stable and significant sales, and who matter quite a lot for people of my generation, such as Pink Floyd, Cliff Richard, Kate Bush, David Bowie, Tina Turner, and Duran Duran.

In addition, the company proposed to divest EMI's classical music labels – EMI Classics and Virgin Classics – and a large number of local EMI entities and various other labels.

Finally, Universal committed to divest Coop, a label-licensing business, and EMI's 50% stake in the popular compilation series called "Now! That's What I Call Music".

These are only examples. You will find of course all the details about these divestments in your press package.

These are highly significant remedies. The total size of the divestiture package represents a very large share of EMI's revenues in Europe – two thirds, roughly speaking.

The rights included in the divestiture package are worldwide and cover the sales of both CDs and digital music. Thus, prospective buyers can exploit the assets in a viable and competitive way.

The decision also requires that at least part of EMI as we know it continues to exist in the hands of a new owner who has experience in the music industry. This will ensure that Universal faces a strong and credible competitor in the market. The buyer of these assets could be either a music publisher ready to enter the recorded-music business or an existing record company.

After reviewing these remedies and conditions, I concluded that the merger would no longer put Universal in a position to harm competition.

Music lovers in Europe can continue to enjoy a wide choice of music services that are culturally diverse, and new platforms will continue to have the ability to innovate.

In my mandate as competition commissioner this case has been one of the most difficult ones, in particular for the reason I mentioned at the start of this speech: music may be an industry, but it is no ordinary industry.

It does not have the same significance in people's lives than many of the economic sectors we usually have to deal with in competition cases.

In the end, I think we have reached a good outcome - one that will preserve culture and innovation, in the best interest of citizens.


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