The European Commission has approved Universal's $1.9bn (£1.2bn) takeover of EMI, albeit with strict conditions that include the divestment of Parlophone and other assets worldwide.
[SEE A LIST OF ALL DIVESTMENTS THROUGH HERE].
Although it has approved the deal, the EC said it had concerns that the transaction, as initially notified, would have allowed Universal to significantly worsen the licencing terms it offered to digital platform that sell music to consumers. However, given the "substantial" commitments since offered by Universal, the Commission said it concluded that the transaction would not raise competition concerns any more.
However, it is understood these divestments represent only 10% of combined revenues and just 30% of EMI's global revenues, much less than had been speculated by some parties in the run-up to this announcement. It follows approvals previously given in Japan, Australia and Canada with the US expected to announce its decision next week.
Commission vice president in charge of competition policy Joaquin Almunia said: "Competition in the music business is crucial to preserve choice, cultural diversity and innovation. In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music. The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits."
As part of the strict conditions Universal must divest globally the Parlophone label, home to acts including Coldplay, Lily Allen, Tinie Tempah, Gorillaz, Kylie Minogue and Tina Turner, but The Beatles catalogue both as a group and solo will move to Universal.
Other divestments include deals with David Guetta and Pink Floyd, EMI France (which houses the David Guetta catalogue), EMI's classical music labels, Mute (where acts including Moby and Depeche Mode are signed), Chrysalis (where the catalogues of acts including Jethro Tull reside), other labels and a large number of local EMI entities. The divestment also takes in Co-operative, which handles marketing for various indie labels. These include Fleet Foxes' label Bella Union and Kitsune, home to Two Door Cinema Club.
Universal has also ageed to sell EMI's 50% stake in Now That's What I Call Music and to continue to license its repertoire for the brand for the next 10 years, although keeps its own stake in the joint venture.
The major has further committed not to include Most Favoured Nation clauses in its favour in any new or renegotiated contract with digital customers in the European Economic Area for 10 years
The EC further explained that Universal's takeover deal as initially presented would have given the major excessive power over its direct retail customers who sell physical and recorded music. It said it particularly focused its investigations on the markets where record companies license their music to digital retailers such as Apple and Spotify. Here it said it found the proposed transaction as initially notified would have increased Universal's size in a way that would likely have enabled it to impose higher prices and more onerous licening terms on digital music providers. This, it said, could have negatively affected the possibilities for innovative providers to expand or launch new music offerings and would have ultimately reduced consumers' choice for digital music as well as cultural diversiy in the European Economic Area.
A Universal statement said: “Universal Music Group is delighted to have received regulatory clearance from the European Commission for its acquisition of EMI Recorded Music. Today’s approval brings to an end an extensive EU regulatory review and the acquisition will benefit the artistic community and music industry. We are delighted Universal Music will retain over two-thirds of EMI on a global basis, contributing to the accretive nature of the deal. With a broad array of EMI artists from Katy Perry, Emeli Sandé, Robbie Williams, Herbert Grönemeyer, Lady Antebellum and Norah Jones, to icons like The Beatles, the Beach Boys, Genesis and Bob Seger, we remain true to our vision: to invest in talent and grow the company to offer consumers more music and more choice, while furthering our support for new digital services and entrepreneurs.”
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