Sony Corp.’s planned purchase of the late Michael Jackson’s stake in a heavyweight music-publishing business is drawing opposition from rival music companies asking European regulators to intervene, according to people familiar with the matter.
Warner Music Group and a group of independent record labels have approached the European Commission, saying the $750 million agreement would give Sony too much power over pricing and deal terms, according to people familiar with the matter who asked not to be named discussing private conversations. Bertelsmann’s BMG Rights Management is considering contacting the commission with similar complaints, another person said.
Sony already owns half of the publishing venture, Sony/ATV Music Publishing, which controls a catalog of artists from the Beatles and Taylor Swift to Bob Dylan and the Rolling Stones. This week it signed a definitive agreement to buy the rest from the Jackson estate, after a preliminary deal in March.
A key concern is that Sony, already the largest music-publishing business, will have more leverage when negotiating licensing deals with the likes of Spotify Ltd. and Alphabet Inc.’s YouTube in an online music market worth $6.9 billion in revenue last year.
Impala, a lobbying group representing independent labels, wants the regulators to block the deal or to force Sony to divest worldwide rights to some artists and catalogs, in line with previous steps they took when Sony and Universal bought EMI Group in 2012.
“It’s difficult to imagine how the Sony/ATV deal could get any kind of green light from the European Commission,” said Helen Smith, Impala’s executive chair. “Just three years ago the EC effectively set a limit when it already said Sony was too big and had to divest assets.”
Lawyers for Warner Music met with European regulators this month to discuss the deal, according to people familiar with the matter.
Spokesmen for Warner Music, BMG and Sony declined to comment. The European Commission declined to comment.
Licensing Heft
The growth of digital streaming services has lifted the value of publishing rights because it gives music fans one-click access to millions of songs. Songwriters and other rights holders receive publishing royalties when the tunes are played back.
Sony/ATV controls almost 30 percent of the music-publishing market, according to Music & Copyright, a trade publication. Sony is also the second-largest music recording company, after Universal Music Group. Universal isn’t planning to lobby against the Sony purchase, according to another person familiar with the matter.
While the EU can clear a deal within six weeks of filing, it can open a more extensive, four-month investigation if it has concerns the deal could reduce consumer choice or increase prices. Analysts say regulators are likely to examine music charts in a number of European countries to see how much share each music publisher holds.
Universal, which bought the recorded-music rights of EMI for 1.2 billion pounds ($1.7 billion) four years ago, was forced to sell the record labels of artists including Black Sabbath, Coldplay and Depeche Mode. Sony had to offload worldwide rights to artists including Ozzy Osbourne, Lenny Kravitz and Robbie Williams to get approval for its $2.2 billion acquisition of EMI’s music-publishing business.
Simon Dyson, a music industry analyst at Ovum in London, said it was unlikely opponents would succeed in persuading regulators to block the deal outright.
“There’s no case where the EU has stopped consolidation in the music industry and they seem to be more keen to get the deal through,’’ he said. It is more likely that regulators would require Sony to divest assets, he said.
Any divestitures required by European regulators would likely extend to the worldwide rights of artists and song catalogs.
Selling the stake in Sony/ATV would let the Jackson estate clear a mountain of debt accumulated by the late King of Pop before his death in 2009 at age 50. The deal calls for a lump-sum payment of $733 million as well as future distributions.
The Jackson family will retain Michael Jackson’s master recordings as well as the Mijac music catalog, which includes songs from Elvis Presley, Aretha Franklin and Sly and the Family Stone.
Michael Jackson bought music-rights catalog ATV in 1985 for $41.5 million, which included most songs of The Beatles. Sony later bought half of ATV and last September began talks with the Jackson estate to buy the rest.
SOURCE: Bloomberg
