UMG-EMI debate comes to D.C.

Music biz honchos spar in Judiciary Committee hearing

Universal Music Group’s pending $1.9 billion acquisition of EMI Music’s label side was weighed in often tart testimony before the Senate Judiciary Committee’s antitrust subcommittee on Thursday.

Advocates of the deal denied that the merged labels’ command of some 40% of music market share would be meaningful in today’s world of diversified music platforms and consumer options, while opponents stressed that combined muscle would give UMG-EMI too great a say in dictating online music licensing and pricing.

Sharpest words came in statements from two executives who both formerly held top roles at UMG and its precursor company MCA: Warner Music Group director (and ex-CEO and chairman) Edgar Bronfman, Jr., who excoriated the deal, and Live Nation Entertainment executive chairman Irving Azoff, who characterized WMG’s opposition as pure self-interest.

Azoff previously appeared before the subcommittee in 2009, when hearings were conducted on the then-pending merger of top concert firm Live Nation and ticketing giant Ticketmaster. That pact was completed in 2010 after settlement of a Dept. of Justice antitrust suit.

The UMG-EMI hearing, chaired by Sen. Herb Kohl (D-WI), unfolded hours after UMG announced that the New Zealand Commerce Commission had become the first regulatory body to approve the deal.

UMG said in a statement, “The NZCC undertook a very thorough investigative process… We continue to work with regulators in other jurisdictions, and remain confident of further clearances.”

On Tuesday, UMG acknowledged that the European Commission had lodged a statement of objections to the purchase (Daily Variety, June 20). The Federal Trade Commission is reviewing the acquisition here.

UMG chairman-CEO Lucian Grainge pumped the imminent deal in a statement submitted to the Senate panel: “We are absolutely committed to investing in EMI as a distinct business that can help us develop even more music and more choice for consumers and fans everywhere. EMI’s labels will be reinvigorated and artists will have more choices, which will lead to more competition in this dynamic market.”

Echoing statements by other pro-acquisition witnesses, EMI Group CEO Roger Faxon told solons that the decline of brick-and-mortar retail and the rise of online sales have created a new “music meritocracy” led by newly empowered consumers.

He added, “Good music quickly rises to the top. The skill is in finding that music, and helping to connect it with an audience — and that skill is not confined to one company or group of companies… Major record companies are no longer the gatekeepers.”

Bronfman told senators that UMG was “seeking a market-dominant position” through the acquisition, and that the merger would do “permanent and pervasive damage” to the industry and consumers.

In his prepared statement, he envisioned a “darker” post-acquisition world “where one company — Universal/EMI — sets the prices, terms and conditions for future digital evolution. Where Universal/EMI would stand as gatekeeper between consumers and what they want, throttling innovation and extracting a heavy toll every step of the way.”

Noting Bronfman’s longtime interest in EMI’s label side and WMG’s stillborn bid for the company last year, Azoff took a stinging swipe at the exec’s opposition to the deal.

“Mr. Bronfman has been talking about combining Warner and EMI for the better part of a decade,” Azoff said. “Warner had a chance to outbid Universal in this process, but chose not to. Now, they regret their decision, and are spending millions to fight the deal. Well, I don’t think the government should step in to give them another bite at the apple.”

Azoff concluded: “Bottom line: The people concerned that a combined EMI-UMG would have too much ‘power’ really just don’t get what has happened to this business over the last decade. Labels don’t control artists. Those days are gone.”

“Control — that’s what this is all about,” said Martin Mills, chairman of the top U.K. independent Beggars Group, who castigated witnesses favoring the acquisition as “monopolists.”

Gigi Sohn, president of digital rights group Public Knowledge – which voiced its opposition to the deal in an April letter to the FTC — continued to sound the alarm about the market concentration that would result from the UMG-EMI splicing.

“The music business is not immune to the exertion of market power,” Sohn said. “If this merger is allowed, consumers and artists will be the losers.”

Witnesses faced most pointed grilling from Kohl — who at one point concurred with Bronfman’s contention that Grainge was not answering questions directly — and Sen. Al Franken (D-MN).