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EC likely to probe Universal-EMI mega-merger

Digital worries

The European Commission is "all but certain" to investigate the mega-merger of Universal Music and EMI, according to sources cited (paywall) in the Financial Times.

The merger reduces the four major record labels to three: UMG, Sony and Warner, with the newly enlarged Universal taking 40 per cent of the market. The Commission is said to be concerned about the digital market, which looks even sicklier after the merger.

In the disk-shifting world, record companies are wholesalers. But in the digital world, the majors have large equity stakes in the startup services such as Spotify, controlling the terms of distribution.

The EC is said to be particularly exercised by one of the olive branches offered by Universal at the time of the merger announcement. Universal is acquiring the record label from EMI while Sony will acquire EMI's profitable publishing division. (Publishing has fared relatively better in the last decade than recordings).

It's this part that prompted Impala, the independent music association, to notify the regulators last month that the deal should be blocked. "The deal would reinforce the duopoly effect with Universal," said Impala, saying a fatter Sony would have too much clout with performance rights societies.

The EC will announce its intentions next week. ®

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