Access Industries cleared to take exclusive control of Deezer

Access Industries cleared to take exclusive control of Deezer

French competition authorities have cleared a proposal that would give Access Industries "exclusive control" over global music streaming platform Deezer.

The decision, outlined in an 11-page document from June 24, but only made public this week, follows a January 12, 2016 deal which saw Access Industries, the umbrella company of London-based Ukrainian-born American billionaire Len Blavatnik, take the lead in a financial round that injected $100 million in Deezer. 

As part of the agreement, Access secured a controlling share in Deezer, over 50%. The exact amount is not disclosed in the document from the competition authority made public. It is understood that in 2015, when Deezer was planning an IPO, which was subsequently postponed, Access had a 26.9% share of the capital. 

The three major companies – Universal, Sony and Warner – were understood to own 20% of the shares in convertible bonds. French telecoms group Orange, which was once the majority shareholder and the shareholder of reference, saw its share diluted to about 10%, which it apparently still owns.

To explain its decision, the competition authority presented a detailed overview of the streaming market and of the way music companies operate, in order to determine if a full control by Access, which also owns Warner Music Group, would affect competition and if it could potentially create a discrimination among record companies.

The authority acknowledged that a combination Deezer/Warner Music under the same ownership would result in an increasing vertical integration, which could make access difficult to other record companies, but ruled out such risk because Warner Music's market share of the French market was below 30%. And to operate on a global scale, Deezer could not simply function with Warner's repertoire and would need to license content from other record companies.

The authority estimated that Warner's market share in France would be between 20-30% (the exact figure was redacted), Universal Music's of 40-50% and Sony's of 20-30%. In the EU, the share would be respectively of 10-20%, 30-40%, and 20-30%, with indie labels accounting for 20-30%.

The document unveiled that at a European level, Deezer's share of the digital market was estimated at 0-5%, against 40-50% for Spotify and 0-5% for Napster. At a national level, Deezer's share was 40-50%, against 20-30% for Spotify.

"Since Warner is the smallest major, it only has a limited market power with regards to other platforms, which limits the risks of discriminating Warner Music to the benefit of Deezer," wrote the competition authority.

The competition authority also noted that because of Deezer's limited turnover, the decision to authorise the transaction did not fall under European jurisdiction. Based on all these points, the authority decided to authorise the transaction and allow Access Industries to take exclusive control of Deezer, thus putting an end to the French ownership of the music streaming service founded in 2007 in Paris.

Music Week Radar, 26th May 2016

JP Cooper – Tidal Wave. Filmed at Music Week Radar, Under the Bridge.

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