Roughly a week from today, a ruling on the fate of the Sony BMG merger will be announced. While the merger initially came into legal question thanks to independent, non-profit trade association Impala, in a weird twist of events, a certain independent, non-profit trade association (I'll give you a hint: it's Impala) has given the fourth-largest music group Warner Music its blessings to acquire EMI, the third-largest music group.
WMG hasn't offered or proposed anything to EMI just yet, but it has made an official "approach," according to both camps. Question: does WMG actually have a shot at regulatory approval when Sony BMG's status is still up in the air? Frankly, yes -- support from Impala is huge. With Impala's anti-merger track record (in addition to the Sony BMG case, Impala is also protesting the Universal/BMG publishing deal), you'd assume the group would adamently disapprove of any more mergers or acquisitions. But the group's actual support of a Warner/EMI romantic consummation could very well result in an acquisition approval.
So why then? What's in it for Impala? According to WMG, "If WMG were to make an offer for EMI within the meaning of the U.K. Takeover Code, WMG has agreed with Impala, subject to the closing of such an offer, to implement certain measures." The statement goes on to say that WMG will be (in its own words):
- providing specified funding for (but taking no equity participation in) the recently announced Merlin initiative, the new global digital rights licensing platform established by the independent music labels to represent the world's independent music sector;
- ensuring the divestiture of certain recorded music assets to reinforce the market power of the independent sector; and
- pursuing various other behavioral commitments which have the aim of benefiting the recorded music market as a whole and, in particular, the independent music sector.
This all sounds pretty good on the surface, but exactly which independent labels are we talking about here? Impala and Merlin obviously do not represent the entire independent sector, so there is plenty of room for potential conflicts regarding access and power politics. And while the statement is far from a detailed contract, some of the wording is so ambiguous that a translation into a formal proposal will probably be highly dubious. Plus, if the acquisition is allowed, what will happen to WMG's and EMI's "indie" distribution companies (ADA and Caroline, respectively) and how might they play a role in shaping the definition of independent music?
As we already reported, EMI is currently busy cutting the shit out of its staff whilst reporting quarterly losses and projecting even more, so what better time than now for Warner to swoop in and take advantage of the PR wreckage? Or perhaps EMI has been trying to attract a buyout offer all along? Who knows. All I know is that WMG's admittedly innovative business negotiations over the last couple years have ensured its relevance in the digital music age, not only in how it can retain major label profits, but also in how it and other major music groups will interact with the increasingly powerful independents.
