Label partners with Impala, Merlin to sell assets to indies

In a move to facilitate regulatory approval of its recent acquisition of Parlophone Label Group, Warner Music Group has partnered with indie orgs Merlin and Impala to sell or license a portion of its new assets to independent labels, the parties announced on Tuesday.

A joint statement between WMG and the two orgs outlined the strategy of the deal, but did not reveal which assets would be made available, nor how. The partnership is clearly intended to help WMG’s $765 million purchase of Parlophone from Universal Music Group (Variety, Feb. 7) pass regulatory scrutiny, though it also offers greater scale to the indie label world.

The agreement echoes the divestment process that lead to WMG’s Parlophone purchase in the first place: In order to appease the European Commission’s concerns after its $1.9 billion acquisition of EMI’s recorded music assets, UMG agreed to offload a number of assets — the most recent of which, Sanctuary, was sold just last Friday.

According to the statement, the partnership — contingent upon WMG’s successful acquisition of PLG — will allow independents to buy, license or distribute a “significant portion of PLG assets or their equivalent in WMG-owned assets.”

Impala was opposed to UMG-EMI acquisition, but declined to attempt to block it with the EC, as Impala executive chair Helen Smith reminded in a statement: “Having not blocked the sale of EMI the result we have negotiated offers regulators the ‘best of both worlds’ in strengthening the independents by bringing more scale into the sector and by creating a more effective challenger to the Universal-Sony (Music Entertainment) duopoly.”

WMG CEO Stephen Cooper added: “We believe this is an important step that will help to foster an environment in which the independent music community can continue to thrive and create new opportunities for growth, benefiting the music industry as a whole and all of its constituents.”

This is not the first time that the third-place major label group and the indie community have found themselves fighting on the same side against the two market leaders; WMG’s Edgar Bronfman Jr. and Impala board member Martin Mills both spoke against the UMG-EMI sale during a U.S. Senate Judiciary hearing last summer. And incidentally, the groundwork for the partnership was laid way back in 2007, when WMG first explored purchasing EMI and agreed with the indie orgs that “(label) concentration should be accompanied by measures to reinforce the independents.”

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