A few open questions around the UMG/EMI merger

Various questions have come to mind when pondering the UMG/EMI merger and the divestments around them. Here’s a few with my own conjecture:

Who will buy up the back catalogue being divested?
I would imagine the likes of Union Square must be readying bids for some of the Sanctuary catalogue, as its a perfect match. Where Mute is concerned I would think Daniel Miller is readying to buy back what he built up, though I wonder if it is equally plausible that some of the larger artists may choose to buy back their own catalogue with investment support to enable them more control over their own releases. Depeche Mode leapt to mind as one example, though I’ve no idea what contract they’re on etc.

If Co-Op goes to PIAS, what will follow?
Clearly, some labels are not happy about the notion of this merger, which begs the question: would another similar venture to Co-Op appear in due course? After all, any of the unhappy labels would presumably have means to exit their deal as they desire. For example, what if the new head of Warners (now that Lyor Cohen has resigned) were to start a new label services venture? Would that pull over any of the unhappy labels, and if so where would that leave the value of the rumoured Co-Op/PIAS deal? The same can be asked of Co-Op’s staff too; key players could walk, and if they did, would that also affect what PIAS have taken on?

Which artists can/will exercise a get-out clause as a result of the sale?
Bear in mind when EMI was sold various artists like the Rolling Stones were all then free to exercise “get out” clauses that allowed them to walk (in the Stones’ case to UMG, ironically). I’m curious then as to whether any of the EMI roster will have a similar option.

What will happen to Parlophone?
I still think that UMG would rather have divested Virgin given the option, but presumably Parlophone represents too large a share of their revenue to ignore and hence had to go in order to cross the threshold of reductions required. That being the case though, could Parlophone take investment and a new CEO to become something of a mini-major? Bear in mind a raft of EMI local offices in Europe are also either being closed or sold off (9 in total when you include one UMG office being closed too); it all amounts to the parts required to put a not-inconsiderable European operation in place (and you can cross-reference that back to the Co-Op sale too).

What will Warners’ next move be?
Lyor Cohen’s departure from WMG is certainly very timely. Rumours already abound that Roger Faxon may be headed over to replace him, and if that were the case one must ask whether he’d then seek to rebuild Warners in EMI’s image – or at least try to enact as much of the once-mooted WMG/EMI merger as he can by snapping up divested EMI assets. It is certainly plausible that he could set up a label services division, and with that could make a bid for the former client’s of EMI’s label services – and potentially Co-Op too. With numerous EMI offices closing and UMG bound by a ten-year agreement forbidding them from buying back any EMI assets, Warners emerges as the prime candidate to snap up some of the offerings here. Doing so would extend their reach in Europe and arguably position them well for the future. Who would be the perfect person to lead that? Roger Faxon.

What will happen to digital innovation?
On the one side, some people – Martin Mills being one – think this is a dark day for innovation, as UMG will now exercise far too much control over new startups and the rates they must pay in order to use their catalogue. An alternative view is that by being so dominant UMG may drive a re-inflation of the value of music. Of course, a counterpoint to that is that any wrong move on that front will drive music fans back to piracy. Only time will tell…

From where I sit, these are exciting times. Over the next few months we will doubtless see a fair bit of movement within the industry and the landscape will certainly change in a fairly significant way. It will be interesting to observe – though I must confess that right now I’m rather glad I don’t work at any of the companies involved, and as ever my thoughts are with the various people who will doubtless be made redundant as changes occur.

I’m curious to hear other people’s thoughts though, so if you have any by all means leave them below…

D.

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