Lessons from EMI: Market Concentration

CCitigroup’s sale of EMI looks set to recoup more of the bank’s investment than original estimations suggested.

Universal Music Group (UMG) bought EMI’s recorded music business for $1.9 billion, while a Sony-led consortium looks set to purchase the publishing unit for $2.2 billion. Citigroup will retain responsibility for pensions liabilities, a key component of the negotiations process. Evidently Citigroup couldn’t attract bids at the desired levels with pensions liabilities included as part of any sale.

But it was Dotted Music all the way back in July who framed the story relative the market as a whole. In an article dating to 15 July I made the inference that any sale would have to clear regulatory laws regarding market concentration. At the time, Sony looked the most likely candidate to purchase EMI, but in the advent of Citigroup’s decision to split the famous label’s recorded music business from the publishing unit EMI will not be dominated by just one major player.

However, there are fears hanging over the deals with EMI and Sony because they are yet to clear regulatory laws regarding market concentration. According to the Financial Times, Universal will pay Citigroup £1.1 million irrespective of whether the deal convinces regulatory authorities in the USA, Japan, the EU, and Australia.

The politics of all this could yet prove controversial. Could the Japanese authorities sanction Sony’s move while blocking UMG’s?

The sale of EMI comes after reports that artists like David Bowie are set to leave EMI, taking issue with the way the label is run. NME reported earlier this week that both UMG and Sony are in talks to sign the icon.

Samuel Agini is the Editor of Andrew Apanov’s Dotted Music.