So Universal will be getting even bigger, Warner is dwarfed, and somewhere in between Sony will try to survive, most likely thanks to its expanded music publishing division.
That’s, in short, the new mapping of the music industry after the decision made by Citi to sell EMI’s recorded music division to Universal Music Group and its parent Vivendi, and EMI Music Publishing to a consortium of investors led by Sony/ATV.
So who are the big winners in this week’s power contest?
Ø Lucian Grainge: the top honcho from UMG, who will add The Beatles, Pink Floyd and Coldplay (and many more) to his roster, and who will now run the biggest music company in the world by a wide margin. If there was a defining moment for him, that's it!
Ø Marty Bandier: The ‘penny’ earner from Sony/ATV, who now puts his hands back on a stack he used to control when he was running EMI Music Publishing. It's Marty's revenge.
Ø Citi: They got out of a business they did not want to be in, and they’ve got most of the money they wanted.
Ø Vivendi: At a limited cost they confirm their leadership in the music business. And If we are to believe what CEO Jean-Bernard Levy told the FT, they're in it for the long haul.
And the losers are:
Ø Edgar Bronfman: Bronfman dreamt it, and Grainge did it! That’s the problem when you play with someone else’s wallet: at some point that someone says stop, and that’s exactly what happened to Edgar Jr. who was betting with Warner Music Group owner Len Blatvatnik’s cash. This might well be the end of Bronfman’s disastrous career in the music business.
Ø Warner Music: Condemned to be the biggest US indie, that’s all! Their global footprint is getting smaller. Last week they’ve decapitated their European management, to put more power into the hands of Lyor Cohen. It will go on until Blatvatnik tires of it all, and sells, most likely to Sony. As one of their artists used to sing: “And now, the end is near…”
Ø Roger Faxon: The CEO of EMI Group advocated a sale of the whole company, not parts of it. It is quite likely that he will lose his job, since it does not seem that neither Grainge, nor Bandier will want to see him around.
Ø Guy Hands: EMI once was his…
Ø Doug Morris: Sony Music’s market share was behind Universal’s and Morris was hired to bridge that gap. It’s going to be harder, if not impossible, unless he buys Warner!
Ø BMG Rights Management: Their growth strategy by acquisition is now kaput. After buying Chrysalis and Bug Music, EMI Music Publishing was going to be the piece de resistance. And their partners KKR will certainly question why they should stay in the venture.
Ø Market diversity: No one can pretend that going from four players to three is an improvement for artists, suppliers, clients and the whole eco-system. No digital platform will be able to launch without Universal’s repertoire and Universal will have the power to dictate its terms. That in itself is sufficient to object to the sale.
Ø Artists in general: Since there are now only three majors left, there are limited options for artists looking for a global career. Yes, there are still a good number of indies, but how many have real muscle?
Ø EMI artists: How many will stay on Universal’s roster? On the publishing side it might be a bit more secure, although previous mergers such as Universal and BMG’s have made a lot of collateral victims among songwriters.
Ø EMI employees: Most of them will lose their jobs since Universal already has a significant structure to handle repertoire and a big roster. Expect more label consolidation.
There will be regulatory hurdles, obviously, especially in Europe where Universal’s dominant position will be scrutinised by the European Commission’s DG Competition. And it can be expected that indie labels organisation Impala will try to derail the deal – as they confirmed they would on the day the sale was announced – in the same way they were instrumental in messing up the promised wedding of Warner and EMI way back in 2001.
Vivendi said that EMI would find in Universal “a safe, long term home, headquartered in Europe”. And Grainge, who is a music man, said he would “preserve the legacy of EMI Music”.
But a company with a market share over 40% has an impact on its eco-system far greater than any other player. With great powers come great responsibilities. Let’s hope Universal will exercise them wisely, otherwise, the music industry will become a game where, in the end, it’s always Lucian who wins! And what’s good for Lucian might not be good for the business as a whole.