Remedies Can Make UMG Buying EMI Good For The Whole Music Industry

There seems little point in trying to block the acquisition of EMI’s recorded music business by French conglomerate Vivendi. Citibank, EMI’s owners, have made it clear that they don’t give a fig what Roger Faxon thinks about EMI’s structure or prospects as a standalone company. The UK Government seems determined to watch from the wings, rather than finding a national interest to protect (why is it that musicians’ taxes are requisitioned to support bankers, but the other way around is so politically unacceptable?).

EMI has been making a reasonable job at adapting, albeit a decade later that it might usefully have, to the online digital music business. But Vivendi’s Universal Music Group has demonstrated time and again that it sees its financial and market power as primarily a weapon to be used against its competitors than a tool to expand the market for all. The migration of Robbie Williams is just a more visible sign of the talent drought and second best market access that Universal can impose at will on EMI.

This might be the reality of the music market – large and rather unsophisticated beasts feeding off the carcass of a dead business model. UMG’s new president, Lucian Grainge, is notorious for suggesting that the music industry has a terminal disease, but that his company will be the last one alive. But what if he is wrong, and there is a rejuvenated music industry waiting to emerge? Rather than allow relentless consolidation to create its own rationale, what could regulators do to ensure that the future is less bleak than the most powerful music executive seems determined to make it?

Regulators have a very rare opportunity, with music’s biggest company now a supplicant rather than dictating wishlists to Business Ministers and Commissioners for conversion into new laws. Here’s a little list of things that even in a consolidated market will help creators and consumers come to terms with the new world, and might even tilt the business back towards inclusiveness, innovation, and stronger public support.

1. Make a concerted attack on the ‘black box’.

There’s hardly a corner of the music industry without so called ‘unattributable’ revenue piling up, later to be shared out among the biggest companies on grounds of market share. Even the most apparently fair of the collecting societies are structurally funnelling cash up to their board members which should by rights go to their small and middling members. This is mirrored internally in many businesses – bigger artists get a share, younger upcoming ones have to hope and wait. Quarterly reporting sets up an irresistible incentive for executives to divert the value of catalogues into unattributable pots – equity in licensees, deal fees, delivery fees, unrecoupable advances and minimum sales guarantees all play their part.

Universal can legitimately be asked to lead on dismantling not only the practice itself but also incentives to perpetuate the unfairness. A bigger more honest and cleaner company would be better for music and the market than two majors of the old school.

2. Tackle intra-industry copyright infringement.

Copyrights are infringed within the music industry on a serious scale, but because this is ‘family business’ rightful owners are reluctant to shine a light or ask for help. Typically larger businesses just assume a wider set of rights than they have been granted by smaller ones and by artists, knowing that those involved will be far keener to preserve a relationship than to insist on their copyrights.

Sometimes this is just clumsiness, as when global businesses just claim ‘worldwide’ rights because the administration to do anything else is onerous. Many artists and small labels find their music either claimed or blocked on new platforms for this reason. Sometimes however it is a kind of systematic arrogance, with serious competitive effects on the small companies on the receiving end.

Whichever, what is needed is for the infringed to be encouraged to come forward more often, and for a behavioural nudge to help infringers stay on the straight and narrow. A simple record of cases and adjudications, kept at the IPO, would quickly identify serial offenders, and help everyone know when they need to keep a special watch on their property.

3. Protect trade associations and collecting societies from capture

Trade associations are always going to be vulnerable to capture by their biggest members, who will naturally take the majority of important committee places and are assured votes on the board. Add to that their greater resources for attending and for briefing their representatives, and it is unsurprising that major label voices dominate the debate.

Collecting societies are not immune either, and often play a role in lobbying as well as their core purpose. The guardian of performers’ rights in sound recordings in the UK, PPL, is dominated by the record labels, and acts as a sort of slush fund for industry initiatives, such as the Featured Artists Coalition, leaving the artists themselves with no clear independent self-funded voice. In the recent term extension debate artists effectively found themselves lobbying for a deal that left them very much the poor cousin in the share out of spoils.

It should not be contentious to make sure collecting societies collect and distribute, leaving lobbying to lobbyists. Nor should it be too much to ask trade associations to make it clear where their money comes from and what they spend it on, and to record their decisions. More accountability to all their members is the best protection for trade associations and collecting societies.

Three simple things that would make the music industry much better, with or without an independent EMI in it. It is difficult to be sad about a business that long ago sacrificed its destiny to the whims of financial engineers and asset strippers. The real British music industry is alive and well in the hundreds and thousands of independent record labels, artists, managers, songwriters, studios, venues and festivals that will find their own destiny. We mustn’t let their interests get obscured by the knackered elephant dying in the room.

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