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Chris Martin of Coldplay: Universal has been told it must sell off the acts signed to EMI subsidiary Parlophone, inclouding Coldplay, when it completes a €1.45bn takeover. Alik Keplicz/AP
Music

Universal forced to drop big names in exchange for EMI takeover

EU regulators say Universal has to sell off some of EMI’s biggest acts – like Coldplay and Kylie Minogue – when it takes over.

UNIVERSAL MUSIC GROUP has won approval from American and European regulators to buy the famed British music company EMI, including the hugely lucrative Beatles catalogue – extending its lead as the world’s largest producer of recorded music.

But the European Union has imposed stringent restrictions on the takeover, and is forcing Universal to sell some of EMI’s biggest acts – including Coldplay, David Guetta and Pink Floyd – when the deal goes through.

The concessions were a bitter pill for Universal, which will pay $1.9 billion (€1.46 billion) for the entire package, only to have to turn around and sell the rights to many of the artists it acquired.

Universal has said it will hold an auction for the rights to those acts, hoping to raise hundreds of millions of dollars in a process expected to take another six to nine months to complete.

Already 22 bidders have lined up to buy those assets, including the next largest record labels, Sony Music and Warner Music Group.

Universal CEO Lucian Grainge said that despite the concessions, the deal first announced last November still made sense.

“We would have preferred not to have made the level of divestments we ended up agreeing to. But that was then, this is now,” he said in a phone interview from Los Angeles. “We think we’ve got something that is compelling creatively, compelling financially and compelling strategically.”

Minogue and Bowie also gone

Among EMI’s assets that must go is Parlophone, home to those three acts as well as Kylie Minogue and David Bowie. The Beatles, which is part of Parlophone, was exempted.

Universal will also have to sell EMI’s classical music divisions, its French and other local branches and labels that are home to Depeche Mode and The Ramones.

The US Federal Trade Commission said that the Universal and EMI businesses were different enough from each other that the deal wasn’t anti-competitive. It added that it didn’t see the need to impose the same conditions on the deal as European regulators because of the differences between the US and European markets.

EU Competition Commissioner Joaquin Almunia said that the fact that the companies involved trade in music made the case a particularly emotional one.

“This has been one of the most difficult discussions in my life as commissioner for competition because of [...] the existence not only of an industry — we are used to dealing with mergers between companies in very different sectors — but the existence of a cultural dimension,” said Almunia.

The FTC’s decision was the last hurdle for Universal, which already represents Jay-Z, Nirvana and U2.

Universal’s rivals, like Warner Music and small independent labels, had strongly protested the deal, saying it could squeeze out other players. Now many will be lined up in a bid to purchase the rights to artists that will be auctioned to offset Universal’s even bigger share of the market.

“This decision has finally put a freeze on Universal’s ability to expand further,” Helen Smith, executive chair of Impala, an industry group for independent labels, said in a statement Friday.

“However, this decision nonetheless reinforces what is already a powerful duopoly.”

- Ryan Nakashima and Sarah DiLorenzo

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Associated Foreign Press