Who gets the castoffs from the biggest record company on the planet?
That is the question gripping the music industry as the Universal Music Group negotiates with European regulators over its $1.9 billion takeover of EMI Music, a deal that would give Universal — already the dominant music company, with hundreds of acts from Justin Bieber to Plácido Domingo — a market share of at least 40 percent.
After tough scrutiny from the European Commission, Universal now seems willing to sell large chunks of EMI as concessions to regulators — as much as half the company could be put up for sale, by one analyst’s estimate. And in one scenario now playing itself out with consequences at all levels of the industry, the biggest beneficiary of this process might be independent labels.
This week it emerged that Lucian Grainge, the chairman of Universal, had made a bold offer to independent labels and executives, giving them the opportunity to buy about $300 million worth of European rights to EMI’s music, according to a report in The Financial Times that was corroborated by recipients and others who had seen the letter. Those assets include the catalogs of Virgin, Mute, Chrysalis and other labels, as well as some of EMI’s vast holdings of classical music and jazz.
The letter came as a surprise given what has been a unified stance by the indies against the deal. Impala, an organization in Brussels that represents thousands of small labels, has been one of its loudest critics. And last month Martin Mills, founder of the Beggars Group, one of the largest and most successful independents — its artists include Adele — minced no words when he spoke against it at a United States Senate hearing.
But the responses to Universal’s offer revealed that not everyone in the independent world opposes the merger — at least, that is, as long as there might be something to be gained from it.
Daniel Miller, who founded the influential label Mute in 1978 and sold it to EMI in 2002, said Mr. Grainge’s letter was aimed at entrepreneurs like him who had sold their babies to EMI but now had a chance to get them back. And he said he was interested in buying.
“Universal is already the biggest music company in the world — that’s not going to change,” Mr. Miller said in an interview on Thursday. “This is an opportunity to strengthen the independent sector. In my personal view, it would be good for Mute, it would be good for our artists, and good for the whole independent distribution network.”
Another respected independent figure who now appears to favor the deal is Patrick Zelnik, the head of the French label Naïve and an Impala board member. He is teaming with Richard Branson on a possible bid for Virgin. Mr. Branson — who founded the label in 1972 and sold it to EMI 20 years ago — called Virgin a “sleeping beauty” that “has been mismanaged in the last 10 years.”
The shocked industry response to Mr. Zelnik’s announcement suggests what might be a strategy by Universal to divide and conquer — by offering deals that can benefit certain small labels, it would seem, Universal has been able to make allies of some former foes. Impala, for example, once unanimous in its opposition, now shows a rift.
But Universal has not been fully successful in damaging the opposition. On Monday, a majority of Impala’s board voted in favor the merger — but the group’s official stance remains unchanged, since the vote came short of a two-thirds requirement to overturn its earlier vote. And it wasn’t long before more indies rallied to the opposition. Merlin, a group that negotiates licensing deals on behalf of thousands of independents, gave its support — unanimously, it noted.
And some indie figures are firm in their opposition to the merger, regardless of the possibility of picking up Universal’s crumbs. In an interview on Thursday, Mr. Mills said he was not interested in buying any of EMI, and still believed that regulators in Europe and the United States should block the deal outright.
“My position is that no remedies are great enough to cure the damage to the market of having a behemoth of this size,” Mr. Mills said. “However, if it is going to go through anyway, it’s better to have remedies than to have nothing.”
The most novel answer to the question of who should get divested EMI assets came in the form of a letter to The Financial Times on Thursday from three musicians who represent the Featured Artists’ Coalition in London. The three co-heads of the group — Ed O’Brien of Radiohead, Nick Mason of Pink Floyd and the 1960s British pop star Sandie Shaw — said that the copyrights for songs should be offered to the artists who created them.
“To sell them to other corporations, whether large or small, is just a perpetuation of an old business model, which has seen the recorded music business halve in value over 10 years,” the artists wrote.
“We do not need to repeat the mistakes of the past,” they added.
Ben Sisario writes about the music industry. Follow @sisario on Twitter.
Article source: http://mediadecoder.blogs.nytimes.com/2012/07/19/in-universal-emi-deal-indie-labels-await-scraps-from-the-table/?partner=rss&emc=rss