Despite IMPALA's consistent and headline-grabbing opposition to the proposed £1.2bn Universal Music takeover of EMI, the EU indie label group's co-president Patrick Zelnik has tonight publicly backed the acquisition.
In a new first-person opinion piece entitled 'A Universal/EMI merger could rescue the music business', Zelnik writes:
"For 12 years at IMPALA... I have fought concentration in the music industry. However, as Universal Music awaits regulators' verdict on its £1.2bn bid for EMI's recorded music division, I think it could be just what the sector needs... as I contemplate EMI's fall from grace and the way it was ravished by private equity, I can see that in the right circumstances this merger could create a more competitive industry, while offering stability to EMI's artists."
In the piece, which appears on the Financial Times site, Zelnik argues that three EC investigations into music industry mergers and acquisitions since the turn of the millennium - including EMI's own foiled mergers with Bertelsmann and then with Time Warner - have done nothing to prevent the "collapse" of the recorded music market, or harm to the British-born label itself.
"The industry has lost more than half of its revenue, EMI was seized by bankers, other big companies cut staff and artists and the independents are, with few exceptions, fighting for their lives," he writes.
Zelnik's arguments then begin to chime with those of Universal Music chairman and CEO Lucian Grainge. The IMPALA man points out that "compared with Apple, Google and Facebook, all music companies are small - and independents miniscule".
He claims that these "digital giants" should increase the revenue they provide to the music industry, whilst music entrepeneurs need to be given room to recoup their investments or make a profit. Both outcomes must take place as the industry "brings back a generation" from stopping paying for music.
"This can be done if the Universal/EMI deal serves as a model, giving entrepreneurial platforms access to label repertoires on a non-discriminatory, transparent basis - in return for a commitment to direct traffic towards legal and affordable services," writes Zelnik - himself president of indie label Naive. "None of this should deprive Universal of power in the digital marketplace. A combined Universal/EMI can play a huge role.
"Moreover, we can use Universal's acquisition as a model to create online competition that reflects music retailing when it was healthy - when specialists, independents and mass merchants had easy, non-discriminatory access to all repertoire. Emulating this online could give a huge boost to digital sales, streaming options and choice."
The IMPALA man does point out that the combined Universal/EMI label must adhere to "non-discriminatory, easy licensing to new platforms" and actually coming together with the independent labels - which he says would "encompass Universal, EMI and independents representing the majority of the market - the rest would soon follow".
Zelnik also argues that any divestments made by Universal as part of the EMI acquisition - rumoured to encompass a sell-off of Virgin or Parlophone - should be sold to the independent label sector, rather than the financial world, and adds that the combined company should help bankroll industry groups that bring together independent and major labels.
Despite these conditions, Zelnik's arguments - which seem to fly in the face of previous IMPALA statements on the matter - will come as a shock to many in the independent label world, something the man himself expects.
"Some will disagree with this," he concludes. "Yet Sony has suffered from its refusal to find a solution to the challenges of the digital age: it is now no larger as a merged entity than it was before it acquired BMG and Jive. The independents' opposition to past mergers led to pension funds and private equity overpaying and in some cases mismanaging assets. The consumer lost and the pirates won.
"Today, we can change this. I call on all sides to create a new pro-growth industry forum - without the vested interests of the current bodies - to balance the market between majors and independents and ensure that content owners, creative entrepreneurs, artists and consumers all benefit from the opportunities created by the internet. I call on regulators to bring Universal and the independents to the table to redress competition concerns and show the world they are capable of vision in transforming troubled industries."
IMPALA's UK equivalent, AIM, is still very much anti-the Universal/EMI deal, as articulated in group chair Alison Wenham's recent AGM keynote speech.
The timing of Zelnik's opinion couldn't be better for Lucian Grainge and Universal. The EC's ultimate decision on the deal could come as quickly as this month - although the Commission has an ultimate deadline of September 6.
Source: Financial Times
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