An Acquisition iDon’tHeart: Liberty Media’s Problematic Bid for iHeartMediaApril 15, 2020
I have horrible taste in music. Or at least, that’s what friends and roommates have long told me. No matter what they say, I maintain my unabashed love of pop-country. Whether it be Thomas Rhett or Florida Georgia Line, I’m always happy to sing along to a catchy tune. But my favorite—and my first celebrity crush—is Taylor Swift. Swift, in addition to being a music icon, is known for her tussles with the music industry establishment. She famously held out from putting her music on streaming services, is currently embroiled in a dispute with her old record company over control of her first six albums, and has been a vocal advocate for artist rights in the new music landscape. Swift explains her artist advocacy as using her position of power to stick up for newer or lesser-known artists. True, smaller artists are definitely bearing the brunt of anti-competitiveness in the music industry. The latest example: the proposed acquisition of iHeartMedia by the conglomerate Liberty Media.
In December 2019, Liberty sought Department of Justice permission to increase its 5% stake in iHeartMedia to a controlling one. DOJ has been radio silent since, but record labels and groups such as the Artist Rights Alliance are rightfully incensed about the deal. The DOJ should block this acquisition because it would increase concentration in an already heavily concentrated industry. The top three record labels account for 70% of the market and the top three publishers—those administering the composition copyrights—account for 60%. If the DOJ does nothing, artists—especially those who lack current popularity and leverage—could be paid less and have less control over their careers. Music listeners may have fewer choices of less diverse music to listen to and may find increased fees passed through to them.
Liberty Media is a company with its fingers in many pies. It owns everything from the Atlanta Braves to Formula 1 racing. Liberty is already a significant player in the music industry through three major holdings. Liberty owns a 33% stake in event promoter and now-ticketseller, LiveNation Entertainment (which owns Ticketmaster), and owns a 71% stake in SiriusXM satellite radio. Liberty’s control over Sirius gives the parent company control over Pandora Radio as well, given Sirius’ 2019 acquisition of the internet radio behemoth. In short, Liberty controls all of satellite radio through SiriusXM, and much of ad-supported internet radio through its streams and Pandora’s $1.2 billion in ad revenue.
The missing piece to completing the radio triumvirate and controlling the entirety of the advertising-supported music is terrestrial radio, the term for the AM/FM stations many of us grew up listening to. Enter iHeartMedia—the country’s biggest owner of terrestrial radio stations, with over 850 AM and FM stations in 150 markets. iHeart also has a popular mobile app used to stream music, radio stations, and podcasts. The company is the top global publisher of podcasts with over 200 million monthly downloads of its offerings. According to iHeart, it reaches nine out of 10 Americans every month, making it among the most powerful media companies in the world.
What’s so concerning about the proposed acquisition is the broader context of Liberty’s bid for control over the music industry. Liberty’s pre-existing control of SiriusXM and Pandora, along with its significant stake in LiveNation, make it a potent player in music. There are reports that Liberty is also attempting to buy a stake in Creative Arts Agency, the agency that represents many musicians. It even sought to potentially buy the record company Universal when a share was sold last year. The bleak music industry dystopia on the horizon is not hard to conjure. Artists could find themselves beholden to one company if they want an agent, want their songs to be played on the radio, or even want to hold a concert. Artists and record labels who don’t agree to Liberty’s take-it-or-leave-it terms could find themselves deprioritized on Liberty’s platforms where Liberty would have the power to ban an artist from each of these major distribution outlets.
Although streaming has taken off in recent years, Liberty’s portfolio of acquisitions remains incredibly important to the music industry as a whole and to artists especially. The lion’s share of an artist’s revenue comes not from streaming royalties but from live performances. Artists are already beholden to Ticketmaster/LiveNation, and the acquisition could further pressure them. iHeartMedia also functions as an event promoter, holding concerts and award shows and, most recently, a nationally broadcast “Living Room Concert” featuring everyone from Elton John to Billie Eilish. Liberty’s LiveNation is no stranger to anti-competitive conduct and this acquisition would only increase LiveNation/Ticketmaster’s market power in event promotion even further.
Given the current ban on any sort of large gatherings due to the pandemic, many artists are already struggling to make money without the ability to hold a concert. Just like with big tech acquisitions, antitrust enforcers should be extra wary of mergers and acquisitions in this unprecedented economic time.
Some might counter that the acquisition could actually be beneficial to overall competition in the music industry. The argument here is that iHeart can be a competitor to the major tech platforms’ music-streaming services (Apple Music, Amazon Music, etc.) with a unique business model. While I’m always happy to see new entrants compete with the dominant tech platforms, this argument is extremely unconvincing. We cannot let the competitive cure be worse than the disease. Just as creating an antitrust exemption for local news to save it is misguided, we shouldn’t allow potentially anticompetitive acquisitions in one market on the theory that it may increase competition in another one. Otherwise you could end up with a Game of Thrones “White Walker” problem: You create a monster to take on your current enemy but end up being subjugated by the monster you’ve created.
Small independent artists and songwriters are struggling and need help. Not only are they compensated differently when their songs are played on AM/FM radio versus when they are streamed online, but there are recent reports that some artists haven’t been receiving their pay from BMI and ASCAP, the dominant performance rights organizations that collect from local bars and restaurants.
Perhaps the greatest thing about music is its diversity. Music can convey the full gamut of emotions and there truly is something for everyone. What is music to one person’s ear might be poison to another. This is exactly why we shouldn’t let just one company control vast swaths of the music industry. If this acquisition goes through, Liberty would be able to pay artists what they want and only play what they want us to hear. Diversity and choice mean competition in the music industry. Otherwise, everyone might be stuck listening to my beloved pop-country ballads for the foreseeable future.
About Alex Petros
Alex is a Policy Counsel at Public Knowledge, where he focuses on digital platform competition issues. Prior to joining Public Knowledge, Alex worked for Senator Amy Klobuchar, Senator Richard Blumenthal, the House Committee on Oversight and Reform, and Senator Joe Donnelly. Alex received his J.D., cum laude, from Georgetown University Law Center and his B.A. from Yale College in Economics and Political Science with distinction. He was born and raised in Lexington, KY and enjoys Kentucky basketball, trivia, fantasy football, and romantic comedies.