Heard about the record company ‘Big Four’? (Universal, Sony, EMI and Warner) Well, a huge publishing deal has gone down this week that could see that number shrinking to become ‘The Big Three.”
News Ltd reports that a group led by Sony Corp in Japan has purchased Britain’s EMI Music Publishing, one of the largest of its kind in the industry, for $US 2.2 billion from prior owners, Citigroup, effectively making the largest music copyrights company in the world.
The move reduces the British label to just its recorded music division and Vivendi – who owns Universal Music Group – has offered to buy for $US 1.9 billion. The deal is being administered by European and US regulators, but if approved, the world’s major music companies will be officially reduced from four to three.
Sony’s purchase of the EMI publishing catalogue merges their some 750,000 tracks with the EMI’s booming 1.3 million strong catalogue to give them control of over 2 million copyrighted songs in total; from The Beatles and Motown, as well as classics like “Somehwhere Over The Rainbow” and contemporary artists likes Norah Jones and Jay-Z.
By acquiring EMI Publishing, Sony/ATV, a 50-50 joint venture between Sony and the Michael Jackson estate, is expected to capture nearly a third of publishing revenue in the world. More precisely, the combined share of EMI and Sony/ATV would be 31% of the global market for music copyrights, combining the former’s 19.3% and the latter’s 11.7% also surpasses the current 22% share owned by current company leader Universal Music Publishing Group.
The acquisition comes in response to record companies’ continued concerns that their industry revenue is being crippled by piracy and illegal downloading, arguing that they need to combine resources to combat their losses (and lest we forget, often suing individuals for the damages).
In fact Naoki Kitagawa, the CEO of Sony Music Entertainment Japan who helped broker the deal, is also the chairman for the Recording Industry Association of Japan who applauded recent changes to the country’s laws to severely punish individuals who breach copyright infringement.
Music publishing however, unlike the continued decline of CD sales, has remained a steady source of income over the years. According to industry newsletter Music & Copyright, publishing companies generated about $US 3.9 billion in revenue, which has held up considerably better than physical sales which have plummeted in recent years.
Sony/ATV also argue that digital music revenue and profits from streaming services, like the recently Australian-launched MOG, Spotify, Rdio, B HiFi Now et al. are “still in their infancy”. Which comes after recent statistics showing that digital music sales outsold physical sales for the first time this year in the UK.
Sony Music’s acquisition of EMI Publishing was cleared by The US Federal Trade Commission along with the European regulators which means the new entity would not have the power to raise rates on its licensing deals. Subsequently ensuring they couldn’t use their majority market share to dominate the pricing regulations, which are closely regulated by laws in various countries; but the news still represents a seismic shift in the record industry.