The most important man in music at the moment is not a hit-spotting executive in New York or London, but, rather, a diminutive Spanish bureaucrat whose decisions about the breakup of EMI will largely determine the shape of the industry for years to come.
JoaquÃn Almunia, the European Commission's vice president for competition, has been the driving figure in the negotiations in Brussels over the future of EMI. In June, the commission approved a $2.2 billion sale of EMI's music publishing business to a group led by Sony, with a relatively small number of concessions.
On Friday, the commission signed off on the Universal Music Group's $1.9 billion bid for EMI's reco rd labels, but only after months of talks and an extensive divestment package that requires selling off the rights to some of EMI's most prominent labels and artists. In the United States, the Federal Trade Commission is reviewing the deal.
On Thursday, while in New York for a conference at Fordham Law School, Mr. Almunia spoke with The Times about his efforts to preserve competition and cultural diversity in the music business.
Even with these disposals, Universal will be by far largest record company in the world. How can you preserve competition with one party so large as a result?
It's true that the position of Universal before the merger was quite strong, and that this merger, without remedies, would have created an unacceptable market position. Having considered the situation, we are ready to clear the decision with remedies. Those remedies will in our view avoid the materialization of the serious risks we observed in our statement of objections.
Broadly speaking, our remedies represent two-thirds of EMI's revenue in European Economic Area. In our analysis, this will not change substantially the competition environment in each national market. And at the European level, this huge package of remedies includes something like 90 percent of the Anglo repertoire of EMI.
The way we have asked Universal to draft the remedies package, we have obtained additional guarantees of noncompetitive risks. One is that rights that will be sold are worldwide, because in the negotiations with the big platforms in the digital music market the conditions are established worldwide, not only for E.E.A. [European Economic Area] users. The second thing - without being precise, because this question is subject to confidentiality protection - is that we will try to establish good conditions for the independents, and, if possible, to have no barriers for the creation of another operator in the market.
Early on, you rejected most of Universal's arguments in justification of the merger, like the idea that their market power is limited by piracy or by digital music services. What arguments did that leave in support of it?
The initial arguments that I received from Universal were not very convincing. All these arguments about piracy, and “We need to build a European champion … .†We are talking about the digital music market, which is mainly global. Don't create barriers where barriers cannot exist anymore.
On other hand, in the analysis of the E.E.A. market and of the markets in each country, will the competitive conditions change substantially because of the merger, after taking into account remedies, yes or no? This is what we looked at. The situation is not the same in the different markets throughout the world. Here in the U.S., the market power of Universal is not as big as it is in Europe.
It's very big, though.
Yes, but not as big as in E urope. And here there is no question of cultural diversity. This is important in Europe, because we deal not only with Anglo repertoire, but Spanish, French, German, Swedish - every country has its own culture, even if the Anglo repertoire is extremely important.
A number of people, including independent groups like Impala, were asking for this to be blocked outright. Was that a possibility?
We met with Impala several times. Yes, they would have liked a negative decision. But other independents understand that they can take advantage of the new conditions of the market, provided that size of the remedies package is substantial - as will be the case - and that some other additional conditions will keep barriers to entry as low as possible.
The situation of this market has changed very quickly in the last years. In some aspects the changes have created better conditions for the indies to survive, but in other ways they have not. So let's see if we cannot crea te additional difficulties with our decision, but try to improve as much as possible the conditions under which the digital music market can become an opportunity for new composers and new singers to flourish, and for the new big successes of indies promoting and selling new music.
Ben Sisario writes about the music industry. Follow @sisario on Twitter.
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