Dr. Strange-label: EMI UNI Merger
This week, US and European Government agencies are reviewing the legality of Universal and Sony carving up vestiges of the neutered major-label, EMI, which controls catalogs for the Beatles, Led Zeppelin, Adele and other heritage acts.
Antitrust experts seem to feel that consolidating the four largest music companies into three would be bad for the music business and anti-competitive. “If you control that much of the marquee content, they can determine the fate of new digital business models by withholding content,” Mark Cooper of Consumer Federation of America said.
Conventional wisdom suggests he is correct. But is he? Or is this is just another example of how government and outside industries simply cannot understand the complexities of music sales? Is in fact, consolidation the new growth for music?
Here are two reasons why some anti-trust experts have it wrong about this and why artists should welcome the merger.
REASON ONE: FRAGMENTATION
I have consulted for several technology companies who are developing music platforms. They all seem to have the same opinion: labels are stubborn and arrogant. Even if you get one major to just say yes, another might say no. And even if you get all majors to say yes, there are too many damn indies to deal with. The end result is that music start-ups have incomplete licensing. The exception being, of course, iTunes and Amazon.
Fragmentation (or more major distributors) makes it more difficult for new emerging digital platforms to close deals. The more record companies there are, the harder it is to get the bulk of any genre. The future of music, according to Universal Music’s Peter Lofrumento who told Reuters , “depends on providing consumers with as many legal alternatives to piracy as possible.”
He’s right. So, unfortunately, as uncompetitive as it might seem, what the industry needs right now is some form of unification to ease the ability for universal licensing (no pun intended.) Once the landscape of digital distribution has settled a bit it will certainly be time for these large labels to be broken.
But we won’t need the government to help with that. History shows the attrition of the music industry will do it organically. Every 12 years the industry contracts, absorbing smaller labels and then expands again, as the more successful labels branch off and become “independent.” (Whatever that really means.) All of this happens without any government intervention whatsoever.
REASON 2: ENDING THE WAR
While labels and publishers need to find a way to unify so they can laterally integrate into new digital platforms, they are simultaneously at war with several of these platforms. Google/YouTube being one and the biggest.
Someday such services will be a significant source of revenue for artists. At the moment, however, Google and other ISPs are paying shards of nickels and dimes, shouting that “information should be free” while they make billions off music in advertising revenue and data brokerage.
Google and other similar Freetards, have been very tough on negotiations with labels. While bloggers (most of which are sponsored by Google and other ISPs) have framed a David a Goliath scenario where they make the music industry Goliath and the Internet David. The reverse is actually more accurate.
The music industry is still at war with certain of these companies and fragmentation makes it easier for them to bully their agenda both down the throats of music companies and the United States legislature.
The fewer large music companies Google and other ISPs have to deal with, the stronger music’s negotiating position will be.
The only people who I can see having a reasonable argument against this merger would be Warner Music, who in the end will end up being the RC Cola to Universal/Sony’s Coke and Pepsi. ISPs will object as well because they know the arguments I make above better than anyone. But as far as artists whose revenue is generated from both advances and royalties, this merger should be a welcome one. For now.
Timing is everything. Ten years ago I would’ve staunchly objected to this, now I think it must happen at this time or the consequences could be severe.
Ironic as it seems, right now, for music, consolidation is the new growth.
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