UK watchdog warns Sony music deal could hurt artists
CMA plans detailed probe into Japanese group’s buyout of independent label AWAL
The UK competition watchdog has raised concerns over Sony’s recent $430m acquisition of independent record label AWAL, warning it could lead to “worse terms for artists and less innovation in the music sector”.
Sony signed a deal with Kobalt Music Group in February to buy AWAL, a label that represents artists including Jungle and Little Simz.
The Competition and Markets Authority launched a formal phase one investigation into the acquisition five months later and said on Tuesday it planned to escalate this into a more detailed probe.
The body said that AWAL could have been a valuable competitor to Sony in a highly concentrated market, resulting in potentially better deals for artists. It added it was “an important emerging player, recognised for its innovative business model” and “one of the few suppliers outside the major labels that has succeeded in gaining a meaningful foothold in the market and has grown significantly in recent years”.
Sony called the CMA decision “perplexing and based on an incorrect understanding of AWAL’s position in the UK”.
“We strongly believe this transaction is unambiguously pro-competitive and that our investment in AWAL is key to its continued growth, and future success,” the company said. “Every other regulatory body that has reviewed this transaction has agreed with our view and approved it quickly. We will continue to work closely with the CMA to resolve any questions they might have.”
AWAL is one of several new digital music companies to have emerged offering artists an alternative to traditional labels to promote and develop their work. It provides musicians with a DIY platform to upload their music as well as services such as global marketing, radio promotion and distribution, and claims to offer better creative control and share of revenue in comparison to mainstream labels.
The CMA said competition between Sony and AWAL could have benefited artists by improving the terms of their deals and allowing them to keep a bigger share of their earnings.
“The music industry forms an important part of the UK’s flourishing entertainment sector, and it’s essential that distributors continue to compete to find new and creative ways of working with artists,” said Colin Raftery, senior director at the CMA. “We’re concerned that this deal could reduce competition in the industry, potentially worsening the deals on the table for many music artists in the UK, and leading to less innovation across the industry.”
AWAL did not immediately respond to a request for comment. Both it and Sony now have five working days to address the CMA’s concerns. If they are not able to do so, the watchdog will begin an in-depth investigation into the merger.
The CMA’s update comes after the UK’s Department of Digital, Culture, Media and Sport committee raised concerns over the rate of consolidation in the record label industry in a report on the economics of music streaming in July.
The committee said it had “deep concerns about the position of major music companies” and said the government should take advice from the CMA on whether “competition in the recorded music market is being distorted”.