“BMG and Sony claim that the merger is a ‘bold move to reinvent and revitalise the music business’ which will ‘bring greater value to consumers’ and mean that ‘artistic expression can thrive.

We welcome all moves to reinvent and revitalise the music business and deliver more value to consumers but that will only be achieved through more competition not more concentration. It is equally difficult to see that artistic expression will thrive if we make it harder for the majority of music companies to compete. The merger is a bold move to make it even easier to control the marketplace by reducing competition, consumer value and choice.

Market conditions may have changed since the last time 2 majors attempted to merge in 2000 but already excessive levels of concentration, product homogenisation and other supply problems have had a large part to play and they won¹t be cured by further concentration.

The Commission would have to rewrite competition rules to get this deal through after its previous market assessment. That is simply not going to happen”.

The independents are concerned about the negative impact that the merger will have across the whole value chain from record companies to publishers to artists, performers, employees, managers, retailers, composers, writers, collecting societies and of course consumers.

The last time 2 majors attempted to merge (EMI/Warner in 2000); the Commission concluded that the independents represent the more entrepreneurial part of the market. They felt that a merger would favour mainstream mass-market music, marginalise the independents and reduce the choice and diversity of music for consumers.
The independents will formally oppose the merger through IMPALA.

The independents are world leaders in terms of R&D and discovering new music and artists. Despite this, they face increasingly complex barriers to trade and severe market access problems. Their market share is in decline and fluctuates widely from territory to territory. Although specific strong markets such as the UK pull the independents¹ share across Europe up to 20.8%, this does not reflect market reality in the majority of European territories, where the share of the independents is considerably lower.

Global music sales in 2002 fell by around 7% - resulting in 250 million fewer albums being sold in 2002 than in 2001 Music is also now competing with a much wider range of activities for people's leisure time - DVDs, computer games, and the internet to name but a few. Universal Music has tried cutting the price of CDs - at least in America, but the other big five music names seem to think that joining forces is the way forward. BMG spokesman Patrick Reilly has said its tie-up with Sony would form a company that would "help us sustain and maintain or record labels". Without the deal, he adds, the pair would face reduced investment.

Experts say the merger would also enable huge cost cuts to take place - merging Sony and BMG’s manufacturing and distribution wings could make potential savings. EMI believed it could save up to £300m a year if they had completed their tie up with Time Warner's music arm before Edgar Bronfman beat them to it. If the mergers take place then the cost savings for the involved Companies are enormous in proportion to operating profits.

The issue worrying the independents is that the majors set the market. These deals may encourage them to exercise semi-monopolistic control in the marketplace. Also, some observers believe a merger could help firms change their strategies to create a ‘brand’ rather than a recording artist, and seek deals with internet portals, TV firms and other media outlets. Pop Idol is a successful example of the way things may

Independent labels have already voiced fears that the creation of just three huge music majors would mean disaster for the industry. Martin Mills, chairman of Beggars Group says the plans present a "Real Danger for independent labels, artists, consumer choice and the market could all be affected, he says. It is possible that the majors could start to exercise corporate muscle to grab cash from merchandising and sponsorship deals that have traditionally gone to the artists themselves. The problem is the incompatibility between art and culture, and corporations." The very real fear is that the Pop Idol route to sales may encourage semi-monopolistic control in the marketplace.

Peter Quicke, head of Ninja Tunes is most concerned about the future of the business model for small labels, as collecting societies - which pick up licence payments from TV, radio, advertising and other forms of airplay - could disappear. AS he says, “If the three majors decided not to pay these societies - then the MCPS, PRS and PPL may disappear. These societies work as most of the industry subscribes to them. But the majors may change and decide to collect themselves - and that change could engineer the collapse of those companies. And if they do collapse, it means less money for artists and independent labels. The market must be regulated and this [merger] must not be allowed to happen."

IMPALA

The Association was established in April 2000 to help independent record companies and music publishers represent their own agenda and organise themselves in the face of increasing concentration in the music sector dominated by 5 majors. It is devoted to representing the interests of independent record companies and publishers and to promoting the expansion and competitiveness of independent music in the interest of cultural diversity.

IMPALA has over 1800 members including the top independents: Divino Music Media (Spain), Beggars Group (UK), Epitaph (US/NL), Playground, MNW, Gazelle (Sweden), Naïve (France), Edel Music (Germany), PIAS Group (Belgium), Roadrunner (The Netherlands), V2 Music Group (UK), Wagram (France) as well as national trade associations from Norway (FONO) France (UPFI), the UK (AIM), Germany (VUT) and Sweden (SOM).
For more information, please see http://www.impalasite.org or contact Helen Smith at IMPALA on T: + 32 2 289 2600 or at hsmith@kernnet.com