On September 21st, the recording industry took a huge turn towards further consolidation when the European Union and the Federal Trade Commission in the United States approved the takeover of EMI by Universal Music Group. The deal would give the new company 40% of the industry. EMI and Universal are two parts of the current industry Big Four. The group also has Sony with 30 percent and Warner Music with 20 percent. EMI is coveted for its famous roster of artists that include The Beatles, Pink Floyd, Frank Sinatra, and Katy Perry. In Europe, the deal has tighter restrictions including sellingoff certain labels that are currently part of EMI, most notably Parlophone,which was the Beatles’ home at the company. The Beatles catalog will not bepart of the sale.
In an article from the Huffington Post, it is argued that the merger will stifle innovation on the digital music. In one group controlling 40% of content, one could view that without that pass a project would likely die. According to the article, very expensive licensing agreements have hurt two very popular digital music services, Spotify and Pandora as these agreements make it very unlikely they will see a profit anytime soon. Spotify at last has the Big Four has shareholders so as investors, they have a stake in the company’s success but it’s always easier when you have the content provider in your back pocket. Another article from InvestorPlace suggests Pandora will also be ok because it’s up to politicians to set Internet radio royalties that dictate their cost. Maybe that’s a loophole that can be exploited to avoid having to pass Universal’s approval. Of course, the issue is not existing services, but potential new services.
My biggest concern with the merger is the state of jobs in the industry. Yes, this big music company will be made of smaller labels, but with a merger always comes consolidation. Why have two marketing departments when you could run it out of one? Will that mean, it will become harder to get the job I want in the music industry going forward. Some would say the rise of independent labels may nullify this but 60 independent labels use Sony’s RED distribution for marketing including the current #1 album in the US, Babel by Mumford & Sons. I wish I had numbers on if job changes occurred during the last big music industry merger Live Nation and Ticketmaster to get a read on this but as we go from a Big Four to a Big Three, I have to believe that the number of people employed in the recording industry will shrink again.