UMG-EMI Merger: Deja Vu All Over Again

Tomorrow I’ll be testifying against the merger of Universal Music Group (UMG) and EMI Music.  A merger between the 1st and 4th largest record companies, in our opinion, would result in a “super-major” label with a 41% market share that would be able to dictate the future of new digital music services. The combined entity could deny licenses to new services, charge them enormous licensing rates, or even take an equity stake in the service.  

This would be bad for consumers, who benefit from lower prices and more choice in a world with more new services and fewer middlemen.  And as our friends at the Future of Music Coalition have so artfully said, these new services also benefit both independent music labels and unsigned artists.

Sound familiar?  Indeed, the merger looks a lot like the failed merger of AT&T and T-Mobile.  A 4-3 merger, this time with the #1 company (rather than the #2), seeking to devour the #4.  And, like T-Mobile, EMI is a maverick firm. Among other things, EMI was the first major label to sell a digital download (a David Bowie single in 1996), the first to sell DRM-less MP3s on iTunes (2007), and the first to license to a digital music service in which it did not have an ownership interest (Pressplay in 2001). 

Why does Public Knowledge care?  As we’ve said time and time again, we believe the best way to limit piracy is to provide consumers with reasonably priced, timely and flexible access to music and movies. 

New digital services provide that kind of access and as a result have been wildly popular – in 2011 alone, consumers bought 1.3 billion singles and 100 million albums at a cost of nearly $2.5 billion.  A combined UMG-EMI is a threat not only to the current services that exist (and there aren’t that many to begin with), but especially to any future ones that might arise.

But supporters of the merger say that UMG already licenses to new services, and would have no incentive not to.   Unfortunately, the company’s history suggests otherwise:  

  • Universal sued the video site Veoh early in its creation for copyright infringement.  Despite the fact that Veoh’s legality was ultimately upheld court, the litigation bankrupted the company and hamstrung its potential.
  • Last year Universal was the first of the major labels to sue the streaming music service Grooveshark, and Universal sued the streaming service Deezer in France after the company refused Universal’s demand that it limit its freemium tier to five consecutive songs. Luckily, the French courts agreed with Deezer, holding that Universal’s behavior was “an abuse of a dominant position.” 
  • And back in 2006, UMG sued MySpace for its users’ copyright infringement, and even brought a suit against Grouper.com, which was owned by fellow major label Sony. 

As music industry revenues from digital music services continue to explode and piracy continues to drop, now is not the time to permit one company to return the industry to the days of top-down, command-and-control music distribution.  It is now up to the Federal Trade Commission to ensure that consumers and musicians continue to benefit from the digital revolution.  If you want to sign our petition telling them to do so, you can do so here.

My testimony is available here. Or watch it below:

The Latest