UMG Acquisition of EMI Divides Indie Community

When Universal’s acquisition of EMI was first announced, members of the independent label community were among the most vocal opponents, citing concerns that the newly combined major would control too much of the market.

Since then, European regulators have expressed similar concerns, and requested Universal and EMI divest a significant amount of assets—about $300 million worth according to the New York Times— in order to win government approval of the transaction. The European Commission wants to reduce the combined market share to less than 40% in any given territory.

As a result, indie labels now stand to benefit from the proposed transaction because they could purchase the assets EMI is selling.

EMI imprints and/or back catalogs up for bids include Virgin, Mute, and Chrysalis—labels that were born as indies and later sold to EMI. UMG boss Lucian Grainge, who would prefer to keep these catalogs out of the hands of the other majors, is trying to entice the entrepreneurs who founded the indies to purchase them back. He is even offering financing to indies. Virgin founder Richard Branson is reportedly working with Patrick Zelnik, the head of the French label Naïve, on a bid for Virgin. Mute founder Daniel Miller is also eyeing his former catalog.

According to the NYT, these opportunities have internally strained Impala, the international indie label trade organization which staunchly opposes the UMG/EMI transaction. Some of Impala’s most prominent members now stand to gain from the deal the group is fighting, including Zelnik who is an Impala board member.

Additionally, the Wall Street Journal reports that the European Commission may not be satisfied with UMG’s proposed back catalog divestments and may urge Universal to sell off the rights to newer music, which could expose the label group to breach of contract lawsuits.

Moreover, UMG may have to pay nearly the entire $1.9 billion purchase price before antitrust regulators in Europe have approved the deal, according to the WSJ.

Universal has until Aug. 1 to file proposed measures to appease the European Commission, which would then have until Sept. 27 to rule on the acquisition.