The chairman of the antitrust subcommittee, Wisconsin Democrat Herb Kohl, opened proceedings by asking whether Universal's music catalogue would be so large after the proposed merger that it would create a gatekeeper that could make or break new digital services.
That was certainly the concern of Beggars' Martin Mills, who said, "Market power is why they're doing this. The power to dominate internet services and impose their demands upon them, the power to leverage a disproportionately onerous deal, the power to squeeze out the competition."
Warner's Edgar Bronfman put forward a similar argument saying, "As the market becomes more concentrated, as one company essentially controls half of the hits and 40% of the overall market, the ability for a third company to influence the outcome becomes smaller and smaller ... At 50% of the hits, Universal can say no to anything."
Senator Michael Lee suggested, "We don't want to punish them for having a lot of hits, though." Bronfman drew a distinction, however, between organic growth and an accquisition adding, "I complement the work [Grainge] has done, and I think if Universal were able to get to 42% market share through its own sweat and hard work, more power to them."
Grainge dismissed the concern though, saying, "We would be insane not to license, develop, make our music available through as many platforms, through as many retailers as possible."
The Universal head also argued that, more generally, Universal's increased size would not give the label that much of an advantage as success depends on the quality of the music that is produced.
On the point of healthy competition in the music industry, Grainge said it is as fierce today as he can ever remember it and suggested that online distribution makes it easier for independent record companies to compete.
EMI CEO Roger Faxon endorsed the deal, but with little apparent gusto, by saying, "I don't think it's a bad thing to happen. There are many scenarios I could map out which I think would be good things to happen. But none of those are available."
He did, however, argue that more music would be released into the market following a Universal/EMI merger, not less.
??"Remember, our product is not a disc," Faxon said. "It's the output of human beings who need to be motivated and need to feel safe and protected as they pursue a very dangerous career."
That point of added stability was one that Grainge emphasised also and seemed to apparently resonate with Senator Lee who said that EMI might be better off under the ownership of music company rather than a financial giant like Citigroup.
Live Nation's Irving Azoff agreed picking Capitol Records as an outfit he felt would benefit from investment under Universal ownership.
Bronfman countered, however, by citing the Universal/Polygram merger in '99, the Sony/BMG merger in 2004 and Warner's own restructuring.
"In all three of them, the artist roster post-merger or restructuring was reduced somewhere between 30 and 40 percent," he said.
Source: Billboard.biz
Advertisement
