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UK And European Independents Appeal Sony BMG Merger
Independent music companies are appealing the decision of the European Commission on 19 July 2004 to approve the Sony/BMG merger. The Commission's decision was notified to IMPALA on 23 September 2004. The independents decided to appeal following a vote by the IMPALA board and consultation at national level, both of which showed overwhelming support for the appeal. This is the first time an approval of a merger in the entertainment sector has been appealed. The independents want to address the market imbalance and play their part in establishing a fair and competitive market place. They owe this to their consumers and music fans. AIM and IMPALA members have already committed the necessary finances for the appeal to a fund which has now been made open to interested parties who wish to show their support. The music market is controlled by 4 major companies which have more than 80% market share, a figure which increases to 95% when looking at the Top 100 sales in Europe (Music and Copyright 2003). Market power and concentration is detrimental to the emergence of new artists, genres and creativity. It goes against choice and diversity. It kills market access and the entrepreneurial spirit of small and medium sized companies, the heart of the music business in particular and the European economy in general. The European Commission recognises that independents are marginalised and have increasing difficulty in competing. Its decision to approve the merger goes against this and its responsibility to promote competition, consumer choice and diversity. When the market favours the strong multinational companies, anti-trust regulators need to address the market failures and also safeguard the potential of the emerging digital business for all players - large and small. Alison Wenham (Chairman and Chief Executive AIM, Vice President IMPALA) said: "We have taken this unprecedented step for what we believe to be the long term health of the entire music industry and all its stakeholders. The threat of a duopoly operating in the business without any real constraints is too great for any serious company or sector to ignore. The independents deserved better from the EU, and it our intention to ensure that the facts of our case are properly respected. "No-one should doubt the seriousness of the decision made by IMPALA, AIM will be leading the UK independent sector in full support of the IMPALA position and we will fight to ensure that this flawed decision is overturned." Martin Mills (IMPALA board member and Chairman of Beggars Group) added: "It has been said that cutbacks at the merged entity will be good for indies. Those benefits, if any, will be no different or greater than those accruing from similar actions by EMI and Warners, and will be a simple result of scalebacks by the majors. In practice what will impact on indies is an aggressive duopoly in the marketplace. We are seeing this already with the effects of Universal's power alone. We have no choice but to appeal." Jeremy Lascelles (CEO Chryalis Music Division, AIM Vice-Chairman) commented: "On the one hand, I think that the consolidation of the majors is a good thing for the independent sector, as it leaves more space for the creative artist-friendly companies to flourish in an environment where the corporate culture is seen by more and more atists as a hostile one. But at the same time, I have a real concern about the potential for an abuse of market dominance. If the collective muscle of an oversized major is used to deny the independents fair or equal access to media and retail, then we have a genuine problem that needs to be addressed immediately." Said Michel Lambot (IMPALA President and Co-Chairman of PIAS Group): "This is about protecting European as well as world-wide cultural diversity and self-determination in a world where globalisation means Hollywood. The news coming in today from the US elections affirms our decision that we need to make a stance against US domination of our cultural, political and economic interests. Although this is not the first time third parties have appealed a Commission decision approving a merger, it is a historic moment for the music business. It is the first time the industry has ever seen such a stance against concentration in the name of market access, fair play and diversity. What impresses me is the extent of feeling right across the sector that enough is enough." Lohan Presencer (MD Ministry of Sound) said: "We are hugely concerned that the combination of two such sizeable pools of repertoire could lead to restrictive and aggressive licensing practices, which for a compilation business like ours could prove incredibly damaging." Said Martin Goldschmidt (MD Cooking Vinyl); "I find it amazing that the EC doesn't consider five companies becoming four with a worldwide market share of 80% to be oligopolistist practices. The EC's main consideration was price fixing and they completely ignored the fact that this will give Sony BMG the leverage to create a dominant market position, making it increasingly difficult for independents to access the market. This is a disaster for anything of cultural interest with a perceived sales potential of less than 1million plus. Goodbye cultural diversity." Peter Quicke (MD Ninja Tune) commented: "We've been painstakingly building Ninja Tune for almost 15 years, and have made a good cultural contribution during that time, bringing hitherto unheard of acts to the fore. The industry has tightened significantly though, over recent years, and a merged SONY BMG flexing its market muscle particularly at retail is going to make the situation a lot worse." Horst Weidenmüller (IMPALA Board Member and CEO of !K7) added: "Part of me says "great - more room for us". But I know that there will only be more room for is in a smaller and smaller space and who wants that? Let's face it the majors will fight to grow their market share with fewer artists and higher marketing budgets. Further increase of concentration of the majors will squeeze independent labels more in an already very difficult market. The consequence will be that our window to get in the shops and get on radio will get smaller and we will be forced to release less music." Patrick Zelnik (IMPALA Vice President and President of Naïve) said: "Diversity is not a philosophy. It is a necessity. The Sony/BMG decision goes against the Commission's own assessment of the market, not only in Sony/BMG but also in 2000 in the attempted EMI/Warner merger. The EU is legally obliged to ensure the defence of cultural diversity across all policy areas. The decision to authorise the merger is a legal, economic, political and cultural mistake. This is a sentiment Jan Figel the new EU Commissioner for Culture clearly underscored when he reminded the European Parliament that European integration is more than just an economic or geographical challenge, it is also a question of values, civilisation and cultural heritage'. Hein Van der Ree, (IMPALA Board Member and MD of Epitaph Europe added: "Having 4 large companies control so much of the market is unprecedented. This level of concentration works as cholesterol in the arteries of the marketplace. The major labels are weak, firing staff, dropping artists and losing money. The independents are strong, but only for as long as the marketplace remains accessible, open, to small companies. That's where we object, and that's where we need protection since 4 majors, in their desperation to maintain market share, will naturally do everything to hold on to their position. In that process they will push small players into a corner, out of the stores, out of the media. They will marginalize us, by default, in their stampede towards market share."
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