The War Behind The Universal-EMI Merger

WWriting in the Financial Times this week, Patrick Zelnik, co-president of Impala, an association representing independent record labels in Europe, dropped the bombshell that he thinks, contradictory to Impala policy, that Universal Music’s proposed £1.2bn takeover of EMI’s recorded music division could be “just what the sector needs”.

The fallout from Zelnik’s article has seen the music industry sit up and take notice. Helen Smith, Impala’s executive chair, was adamant:

“We all respect Patrick Zelnik’s view, but the FT article is the Naive position, not the Impala position.”

Patrick Zelnik

In a statement released the day after Zelnik’s article appeared, Impala’s executive chair was in no mood to mix her words. Smith discussed a board meeting conducted on the day Zelnik’s article was published, in which board members voted to continue Impala’s opposition to the Universal–EMI merger.

From the moment I read Zelnik’s article, I knew that a statement from Impala would be forthcoming. The association acted swiftly, but there could be a number of things that the board meeting tells us.

For instance, was Impala aware that Zelnik was set to publish such a controversial article in such a prominent newspaper?

Why did Impala feel the need to call for a board meeting?

Will Zelnik continue in his current capacity as co-president of Impala? How will Zelnik’s near defection affect the European Commission’s decision as to whether the Universal-EMI merger should go through?

The impact of Zelnik’s article was rendered greater by the fact that it preceded Impala’s board meeting on whether or not to continue its opposition to the Universal/EMI merger. Had Impala anticipated the Financial Times article, a statement asserting Impala’s disappointment with Zelnik’s new line of thought would have been enough to soften the blow. As it stands, it seems that the board meeting was one of emergency, as opposed to one of serene but steely nerve. Or, imagine a scenario in which a board meeting was called the day before Zelnik’s article was published. The vote, taken in advance of his article, would have reflected badly on Zelnik, even portraying his article as the work of a co-president scorned by the board; the act of a spoiled child. In the event, Zelnik worked the media to his will, ensuring his view as the one gaining prominence.

But one has to feel for Helen Smith, the music industry’s valiant watchdog. Zelnik has exploited his position at Impala in order to communicate, and proliferate, his view. A less undignified course of action would have been to resign his position as co-president of Impala, before publishing his dissenting views in the Financial Times – that is if the newspaper would have published an article by the ex co-president of Impala.

While I will not take the opportunity to pass comment on the merits of Zelnik’s view (for there are many), Smith is wrong to describe his position as the “Naive” position. The major labels call the shots in the music business, and Zelnik’s call for “regulators to bring Universal and the independents to the table to redress competition concerns and show the world they are capable of vision in transforming troubled industries” is a bold one, but perhaps the right step forward. If the Financial Times’ revelation that 14 of Impala’s 24 board members voted in favour of Zelnik’s view is accurate, Smith’s comment that the board took a clear decision to continue its opposition to the Universal-EMI merger is misleading to say the least.

This affair, irrespective of whose opinion is the right one, has not reflected well on the music industry.

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