Indies sound alarm after UMG Downtown and PIAS acquisitions

Indie trade groups and label execs are sounding the alarm after UMG Downtown and PIAS acquisition – two crucial independent music companies. Learn what’s at stake and why it matters for artists and labels alike.

Indies sound alarm after UMG Downtown and PIAS acquisitions

by Stacy Simons Santos from Celebrity Access

Following the announcement that UMG-owned Virgin Group has struck a deal to buy Downtown, the European independent trade association IMPALA raises concerns about concentration and reducing independent routes to market. The move is hot on the heels of UMG acquiring control of [PIAS], another significant independent in both recording and distribution, again raising serious competition issues.

Helen Smith, Executive Chair IMPALA, commented: “This is another land grab. We expect competition authorities in key jurisdictions to carry out thorough investigations and block these deals. The time has come for cutting UMG’s market position back to what was already set. This is a huge market share grab by UMG and seriously reduces independent routes to the market. We look to the new European Commission to set the standard internationally.”

Presented as collaborative, the move is part of a clear commercial strategy to target independent distribution to gain market share and control. Having already bought [PIAS], this is now the digital equivalent, accounting for a significant portion of the independent sector’s delivery to digital services.

Martin Mills, founder of Beggars Group added: “The cynical use of the Virgin brand, once synonymous with independent entrepreneurship, should not hide the fact that this is about utter dominance and control. Paradoxically UMG’s artist centric stance means it has already disenfranchised millions of artists whose rights they are now acquiring. This is another step on the road of UMG’s pretence to be the independents fairy godmother. But there’s a wolf under that cape.”

IMPALA’s executive committee has already discussed how unchecked concentration in the music market continues to be a serious problem. The latest move by UMG squeezes the independents further in an already very concentrated market and helps UMG move further into the market for distribution and services for labels and artists. This means more market share and gives UMG control over the opposition. UMG suing Believe is another part of the strategy.

This goes against the principle established by the European Commission over ten years ago during UMG’s takeover of EMI, that UMG is already too big.

IMPALA chair Dario Draštata commented: “This is a sea change for the independent music sector with UMG leading charge at the independents and other majors following. Let’s all remember that UMG already reached the maximum size. When it tried to buy EMI in 2012, UMG was forced by the EC to make the biggest set of divestments of any merger ever approved in any sector. On top, its digital deals were supervised for 10 years, and it faced a no buy back ban for ten years. And now UMG – still the biggest music company in the world – is acquiring one of the biggest indie distributors, just after acquiring one of the biggest independent in Europe. This would create a fundamental shift in the competitive dynamics of the music market.”

Yet, UMG’s acquisition of Downtown and [PIAS] will increase the power of UMG across Europe and beyond, including the UK and the USA. IMPALA expects regulators in these jurisdictions to take action.

IMPALA president Francesca Trainini continued: “The EC must lead the way here. It is the opportunity for the new Commission to establish a clear agenda on concentration in the music market. As well as strengthening UMG in terms of market share, it eliminates another principal distribution competitor on top of PIAS and should be stopped. It narrows route to market options for artists and labels. As IMPALA has pointed out before, it is not just a question of an arithmetical increase of market share points by one major but a huge loss to the independents, which has a compound effect. It weakens competition and completely changes the competitive dynamics of the music market, to the severe detriment of competitors, artists and fans.”

Gee Davy, CEO of AIM, commented: “The potential sale of Downtown Music – including FUGA, a longstanding favourite with independents – to Universal’s Virgin Music Group is more concerning news for the global independent music community. Following on from the recent PIAS/Integral acquisition, it plays into a continuing trend towards over-consolidation and reduction of independent routes to market. It is vital to uphold a true choice of partners for artists and labels and ensure that negotiating power does not become unbalanced. Only in this way can homegrown artists and businesses access fair deals, investment and growth.”

Helen Smith, IMPALA’s Executive Chair, concluded: “We can be in no doubt what these deals mean about UMG’s intention. IMPALA expects regulators to investigate the acquisition and answer the question the industry is asking about how it is possible for UMG to gain more market share after it was already considered too big. Both physical and digital markets must be assessed, including distribution services, as well as the impact on competitors, digital services, artists and fans. This is on top of the [PIAS] deal, which we understand regulators are also interested in.”

The loss of such big players for the independent sector compounds the competitive impact, and the risk is that this trend will continue. IMPALA has been signaling the problem of creeping dominance for many years, and it’s time for a new competition approach to address this question.

Sony and Warner are also following the same path, buying stakes in leading independent music companies in national markets across Europe and elsewhere. Recent examples include Sony buying Altafonte, another key distributor in Spain and Latin America, Cobalt in Greece and Warner acquiring Cloud 9 in the Netherlands in the last few weeks. This is on top of multiple key acquisitions and other deals in strategic markets globally. When we look at how the market has evolved, it’s clear that the majors are carving up the world between them. IMPALA calls on regulators to intervene and stop this trend. This goes beyond the independent sector. It’s diversity as a whole that is at stake and this will impact fans in Europe and across the world.