UMG agrees to label divestments

Industry leader would offload Parlophone, Chrysalis, others

In a move to satisfy regulators weighing the purchase of EMI’s labels, Universal Music Group has agreed to divest several key holdings, including EMI’s 89-year-old flagship imprint Parlophone.

Following more than a week of talks with European Commission regulators in Brussels, UMG submitted its remedies package on Friday.

UMG said in a statement, “We believe the package fully addresses the Commission’s concerns and follows our constructive discussions with regulators, independent labels and competitors. We look forward to working further with the Commission and are confident of receiving clearance.”

Approval of the UMG purchase of EMI is a high-stakes game, since UMG has pledged to pay the $1.9 billion price for the company to owner Citigroup whether or not regulators approve the deal.

Sale of labels is keyed to pushing the combined UMG-EMI market share below 40% in certain European territories.

According to a source familiar with the UMG-EC talks, with regulatory approval, Parlophone — with the exception of EMI’s crown jewel, the Beatles catalog — will be sold off. Founded in 1923, the imprint numbers Coldplay and Gorillaz among its hit contemporary acts.

Chrysalis Records will also be turned, although the label’s major act, U.K. star Robbie Williams, will remain with the merged firms.

EMI Classics, EMI France, EMI Czech Republic, EMI Portugal, EMI Belgium, EMI Poland, EMI Sweden and EMI Norway will also go on the block, along with UMG’s catalog imprint Sanctuary.

Mute Records will be sold. Label founder Daniel Miller, who sold Mute to EMI for £23 million a decade ago, publicly expressed interest in buying it back last week.

EMI’s share of the major-label hits compilation “Now That’s What I Call Music” will also be offloaded, but UMG will retain its share.

The divestitures will pertain to Europe only, with any licensing agreements in the rest of the world remaining in place.

Significantly, Virgin Records will not be sold. It was widely reported that Virgin founder Richard Branson was hoping to buy back the firm in partnership with Patrick Zelnik, founder of multi-media company Naive and co-president of Euro trade group Impala (Daily Variety, July 18).

Friday’s finalization of the remedies package beats an Aug. 1 deadline set by the EC, which had outlined objections to the purchase to UMG in a 200-page brief submitted in June. European independents had loudly decried the deal, saying the merged UMG-EMI’s large market share would give the company an anti-competitive edge.

Over the last 10 days, the indies’ stiff opposition appeared to soften in certain quarters, as Zelnik and other Impala members expressed fresh approval of the UMG-EMI deal. Reports said that UMG chairman Lucian Grainge had offered a first look at assets for sale to some prominent European indie companies.

According to the source, UMG has received calls regarding the assets to be sold from such prospective buyers as BMG Rights Management (rumored to be interested in Parlophone), Sony Music Entertainment, Ron Burkle and Ronald Perelman.

The remedies package will now be market-tested by the EC over the next three-five working days.

The Federal Trade Commission continues to scrutinize the deal in the U.S. The Senate Judiciary Committee’s antitrust subcommittee held a sometimes contentious hearing on the merger in June (Daily Variety, June 22).