EU to probe Sony-BMG music deal
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Beyonce Knowles, a multi-million-dollar artist for Sony, which now faces an EU probe for its merger with BMG.
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FRANKFURT (Reuters) -- European Union regulators say they will open an in-depth probe into Sony and Bertelsmann's planned music unit merger, heralding a battle between the two major labels and independent producers.
The four-month probe will give the European Commission a chance to listen to all sides in an industry facing weak retail sales because of new competition from online file-sharing and other forms of entertainment.
"The Commission is concerned the transaction might create or strengthen a dominant position," it said in a statement Thursday.
SonyBMG, a 50-50 joint venture, would combine No. 2 Sony, which includes such artists as Beyonce Knowles and Bruce Springsteen, with No. 5 BMG, home to Britney Spears and Elvis Presley.
After the dust clears there would be four major companies holding 80 percent of the record market in Europe and in most major countries, the commission said.
Bertelsmann and Sony will face off against a contingent of 2000 independent music labels banded together as trade group IMPALA, which played a key role in the EU's rejection of a merger between EMI and Time Warner Inc's Warner Music Group.
Bertelsmann said in a statement: "We feel well prepared. We look forward to cooperating with the regulatory authorities over the coming weeks and months."
Sources close to Bertelsmann say the landscape has changed since the EMI deal was rejected.
"This announcement does not imply that approval is unlikely," one source said, arguing that recording companies face competition from DVDs, video games, or television.
"The changes on the music market are obvious for anybody. Demand for recorded music is declining because there are now many other distribution channels -- legal and illegal alike," a source close to Bertelsmann said.
The Commission said it has taken the views of critics into account in opening its in-depth investigation.
The Commission said it was investigating whether Bertelsmann may use its interests in RTL radio and television to give preference to SonyBMG, "foreclosing competing record companies from equal access...in some countries."
It is also following up on the view of critics that Sony Connect, a Web downloading music service to be launched soon, may bar competitors and incompatible digital players.
"Our main point is access. We want to avoid a situation where a combined entity makes it impossible for smaller independent labels and artists to get access to broadcasters and retailers," Philippe Kern, secretary general for IMPALA, said last month.
The group argues that consolidation among the five major labels would squeeze out the independent labels and threaten the careers of aspiring artists.
Industry sources attending an annual music get-together in Cannes last month said Sony and BMG's biggest rivals, including EMI Group Plc and Universal Music, also oppose the merger but the companies have not commented on the record.
The deal would create a company rivalling leader Universal Music Group and vault the new firm ahead of EMI and Warner.
Sony and BMG's combined share of global music sales was 25.2 percent in 2002, just below Universal Music's 25.9 percent share.
Sony Music's Andy Lack will be chief executive of the venture and BMG's Rolf Schmidt-Holtz will become chairman.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
