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Indie community in Europe announces deal with Warner on back of its PLG acquisition

By | Published on Tuesday 19 February 2013

Warner Music

The independent label community in Europe has reached a deal with Warner Music that will unlock some of the Parlophone Label Group assets the major is in the process of acquiring so that independent players will have the opportunity to “buy, license or distribute” them.

The deal follows the announcement earlier this month that Warner had won the bidding to buy PLG, which includes most (though not all) of the EMI catalogues and front-line units in Europe that Universal Music was forced to sell by European regulators when it acquired the wider EMI recorded music business last year. Official representatives of the indie label community opposed the Universal/EMI merger in Europe, though some key indie players supported Universal’s bid once significant asset-sale concessions were on the table.

Independent community opinion was less divided, however, when it was announced PLG was going to Warner, with pan-European indie labels trade body IMPALA and indie digital rights agency Merlin both welcoming the news with immediate effect. Warner taking most of the former EMI assets on the table is attractive to the indie community partly because it beefs up the smaller of the major labels, enabling it to better compete with the big bad duopoly in music rights – Sony and Universal. But Warner’s offer to work with the indie community in Europe to fully capitalise on the potential of the PLG catalogues and assets was also presumably a factor.

Although the practicalities of the indie community deal aren’t fully clear, IMPALA and Merlin said this afternoon that the “landmark agreement” would “bring more scale into the independent sector through an opportunity to buy, license or distribute a significant portion of PLG assets or their equivalent in WMG-owned assets”. The statement added that “other measures designed to help rebalance the recorded music market will also be put in place including behavioural commitments and capacity-building initiatives for independents, which will be implemented by Merlin and IMPALA”.

The two bodies continued: “The independent organisations were keen to try to bolster the independent sector and create a new environment to rebuild a market suffering from an ever increasing move towards duopolisation, an issue independents have raised with regulators for many years. The agreement aims to provide a concrete response to the problems identified in the marketplace during the European Commission’s investigation of the Universal/EMI merger. The EC found that concentration foreclosed opportunities for independents and others across the whole of Europe, in both the physical and digital markets, as well as in terms of access to radio and other media”.

Warner’s acquisition of PLG is still subject to EC approval, and therefore so is the deal with IMPALA and Merlin. Though few expect any complications when regulators consider Warner’s PLG purchase, especially given the indie community’s support for the arrangement.

Confirming today’s agreement, IMPALA Executive Chair Helen Smith told CMU: “Having not blocked the sale of EMI, the result we have negotiated offers regulators the ‘best of both worlds’ in strengthening the independents by bringing more scale into the sector and by creating a more effective challenger to the Universal/Sony duopoly. Making sure our deal benefits labels of all sizes is a top priority and, by setting out the principles the parties agree are essential, we believe we have found a ‘blueprint’ for a market where independent artists should have a more level playing field. It is great to see Warner’s commitment to the independent sector reach fruition in this way”.

Charles Caldas, CEO of Merlin, added: “We consistently said that the best result for our members was for the UMG/EMI transaction to be blocked outright. Once it became clear that this was not going to happen, and that we were going to be faced with further market concentration, we had a duty to ensure our members had the best possible chance to continue to compete. This opportunity, to grow into what would otherwise be an unbridgeable gap between the largest majors and the rest of the market, should improve their ability to do so”.

And for their side, Warner Music Group CEO Stephen Cooper said: “We are pleased to have entered into an agreement under which we will work together with IMPALA and Merlin to support and strengthen the independent music community. We believe this is an important step that will help to foster an environment in which the independent music community can continue to thrive and create new opportunities for growth, benefiting the music industry as a whole and all of its constituents”.

IMPALA did once before discuss an alliance with Warner Music when further consolidation of the music industry was on the cards. Then it was Warner and EMI that were considering a merger, and IMPALA’s deal with the former, at the time led by Edgar Bronfman Jr, wasn’t without controversy. Though in the end the two major’s merger talks fell through anyway and the arrangement with IMPALA never came into effect. This partnership looks much more likely to become a reality.