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The Universal EMI deal is heating up the music business

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The interest expressed by the Universal Music Group in buying a large chunk of EMI is one of the most explosive pieces of news to hit the music industry in recent times. If completed, this merger would lead to the formation a real behemoth with stars like Lady Gaga, Rihanna, Katy Perry, Pink Floyd and The Beatles coming under a single banner.

Stiff Opposition to the Deal

As expected, the very idea of the merger has caused many opponents to stand up with their views. Some of the notable members of the opposition include rival music publishing company Warner Music Group, smaller independent music companies and various consumer groups. Together they are urging American and European regulators to disrupt the merger as it would give the newly formed entity absolute monopoly in the music market.

There are also allegations that such a merger might prompt the new company to license its music to only those firms willing to pay its asking price. They contend that if and when a new music company does come up with an innovative way to sell digital music, the merged EMI-Universal unit will make every effort to stifle its plans.

Another short in the arm for the critics of the deal came from IMPALA, which is a Europe-based association of independent music companies. Statistics from IMPALA point out that close to 90% of the top 1000 downloads were from the top four music publishing companies.

There are also concerns as to the degree of freedom an artist will enjoy post this merger. Many contend that the merger will make it difficult for an artist to switch to a new label. Additionally, European officials are concerned as the supposed merger will give rise to a company that will almost be twice the size of its closest European rival.

Counter Argument

However, there are also many other industry and legal experts who are vouching for this merger. According to them, the companies had the most power a decade ago. Today they are almost powerless. And in the event that the American Federal Trade Commission (FTC) does block the deal, it will be more out of the lack of understanding of the music industry than anything else.

EMI’s Stand

EMI, in the face of all-round opposition, has made some claims of its own in support of the merger. According to them, the company has been severely compromised by the spread of rampant piracy all over the world. It has also taken massive losses due to the low pricing by industry majors like Apple and Amazon. Both these companies sell music tracks at a very low price and bundle them with more expensive devices.

Additionally, in response to the allegation that the merger would severely dent the publishing aspirations of smaller startups; EMI responded that it was one of the biggest licensors of digital music worldwide. In fact, in terms of sheer numbers no other company could match its library of digitally licensed music tracks.
The matter, as of now, is under consideration by both the US FTC and European regulators.