Recorded Music Market Consolidation Comes Under Senate Scrutiny

The latest round of music industry consolidation is coming under antitrust scrutiny as the antitrust subcommittee of the U.S. Senate Judiciary Committee prepares for a hearing examining Universal Music Group’s proposed acquisition of the recorded-music business of EMI Music Ltd.

If the proposed $1.9 billion acquisition is approved, the number of major music labels will be half of what it was in the mid-1990s.

Universal Music Group’s 2011 proposal to acquire competitor EMI Music is already under review by the U.S. Federal Trade Commission and the European Commission.  Although the review by the Senate antitrust subcommittee will have no formal impact on the FTC decision, discussions in the Senate hearing could well shape the debate on whether the acquisition should be approved.

Currently, four major labels control 90 percent of the U.S. recorded music market.  If Universal and EMI merge, 90 percent of the U.S. market would be controlled by just three companies.

Universal is the largest recorded music company with roughly 30 percent of the global recordings market.  EMI is the fourth largest with roughly 10 percent of the global market.  Approval of the deal would concentrate roughly 40 percent of the recorded music market in Universal.

The FTC is reviewing whether the deal would violate antitrust laws by giving Universal enough market power to stifle competition either individually or collusively.  Opponents of the acquisition argue that it would reduce competition by allowing too much market concentration and by creating a company that could effectively control the future of digital media services.  Such opponents include rival music label Warner Music Group, the Consumer Federation of America, and digital rights group Public Knowledge.  Supporters include the American Federation of Musicians and SAG-AFTRA.

When asked about the Senate hearing, a Universal spokesman stated that the company “welcome(s) the opportunity to answer any questions that the subcommittee may have, address the facts and debunk myths.”  The hearing could be scheduled as early as June.