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UMG-EMI Merger: Deja Vu All Over Again

June 20, 2012 , ,

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: