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EMI Universal Deal Cleared, Giving One Company Veto Rights On Pretty Much Any New Music Service

from the well-that-could-be-a-problem dept

This isn’t a huge surprise, but EU and US regulators both approved Universal Music’s deal to buy EMI today. Under the terms from the EU, they will have to sell off some EMI assets, including the iconic Parlophone label. There is a part of me that thinks that the complaints against this deal are a bit overblown, seeing as it’s about linking up two dinosaurs who’ve failed to adapt — and bringing them together won’t fix any of the major problems those two labels face. But there are some very real concerns about how this could impact innovation online. For better or for worse, setting up digital music services today requires doing deals with the major labels. If you’re just doing webcasting (i.e., broadcast) there are agreed upon — but insanely high — rates you can use (more on that later today). However, if you’re doing anything interactive or offering digital downloads, then you have to cut deals.

A story earlier this week at the Huffington Post, does a really nice job laying out how this deal effectively gives a few Universal Music execs veto power over any new music startup. Because if you’re launching a music service today, you generally want it to offer a lot of popular music, and between Universal Music and EMI, they control a huge portion of that market — much of it historical back catalog stuff, but also some of the more popular mega-acts today. The HuffPo writeup notes that Steve Jobs played the labels off of each other to get them to sign on to iTunes. But, today, the new UMG could control that process.

According to Paul Vidich, a former Warner Music executive who closed the iTunes deal, the pending merger between Universal and EMI could put an end to that state of affairs.

“Without a UMG-EMI license, they won’t have a business,” said Vidich, referring to new digital startups. “Within the new UMG-EMI there will be only a handful of senior executives who make these key licensing decisions. So this small group will become the gatekeepers for music startups that require these licenses. The psychology, pay packages and strategic interests of these executives will have an outsized impact on diversity and innovation in the entire online music industry.”

Remember, Universal is the company whose former CEO, Doug Morris, once gleefully explained how he didn’t understand technology and didn’t even try to hire someone who did, because he wouldn’t know how. Amazingly, his board let him keep his job for many years (he’s since moved on to head up Sony Music). Morris’ replacement at UMG, Lucian Grainge, has talked about how the CD format is important to the company’s future. And he’s now basically the guy with veto power over any new music service.

That does not bode well for the online digital music marketplace.

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Companies: emi, riaa, universal music

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Comments on “EMI Universal Deal Cleared, Giving One Company Veto Rights On Pretty Much Any New Music Service”

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53 Comments
Zakida Paul says:

Re: Re: The music industry needs to die

Broken record, much? You realise you are just giving them lower sales that they use to blame on piracy, right?

I must admit that the vast majority of music I buy is from independent labels but there are a few bands on the majors that I like (mostly older ones who rarely release new music these days).

art guerrilla (profile) says:

Re: Re: Re: The music industry needs to die

…and so we *have to* buy music to ‘prove’ we aren’t pirate scum ? ? ?
i don’t pirate (yet, the MAFIAA is pushing me to that), but i don’t buy MAFIAA-backed shit either…

archive.org : THE greatest website, period.

picked up some tasty piano tunes by charles parker -no, not *that* charlie parker- from there… if it was up to the MAFIAA, i would NEVER have heard of this guy… *now*, i’m looking for his music to BUY, whoda thunk it (NOT the MAFIAA, that is for sure…)

art guerrilla
aka ann archy
eof

Anonymous Coward says:

Re: The music industry needs to die

The music industry needs to die

Sorry to be pedantic, but that’s a lot like saying terrorism needs to die. The word(s) will always be there and will always be used and abused to separate patrons from money.

What you no-doubt meant to say is that the current structure of the music industry (emphasis on “industry”) needs to die (imo, it is dying), but soon. That “soon” is the tricky part. Sadly, it may take a few generations for it to die. It took about a generation (close to 20 years) for the mp3 to get this far.

BUT, there are some wildcards and weaknesses that could expedite change.

The biggest weakness (imo) is the very reason for existence of what is left of that industry – profitability to shareholders. That can drop like a rock and an industry can drop like a rock with it.

Perhaps the biggest wild-card is new “artists” (I think that you can forget about most signed “artists” – by and large, they will support the aging status quo due to fears arising from lack of understanding of the new world, old biases and the like. But what will new “artists” do? Yes, we’ve seen a few mavericks and some of them have had success, but things have yet to change dramatically. Imo, new “artists” still ache (by and large) to be part of the old system, which they view as less risky. I think that the tide has yet to turn there.

As usual, we live in uncertain times. However, the general progress of history is toward the future.

Sadly, it may not be on a time-scale that suits your wishes. Then again – it could – stuff happens.

Atkray (profile) says:

Re: Give them what they want

My thoughts exactly.

Someone is going to build a site with unlimited streaming and unlimited downloads all for free of just indie artists who are hungry and looking for an audience. It will start small and slowly grow until it gets to a point where the artists signed to labels will be asking their handlers “why isn’t my music on there”.

knighttoday (profile) says:

Music business consolidation

What I am doing as a consumer is ceasing to use the product as it is the only true power I have over these huge corporations. Music is not a requirement to survive in life, at least not purchased music. I find other ways to meet my need for music and figure if enough people get sick and tired of being crapped on as a consumer they will also cease consuming. Sure it is very inconvenient and in the short run I seem to be the one to suffer but that is just a perspective and those can be changed more easily than causing corporations to care about the consumer. To be perfectly honest I do not hold out much hope as it SEEMS the general public have no energy to fight for their needs and rights. They act more like sheep than anything and corporations know this and take full advantage.

Anonymous Coward says:

if you’re launching a music service today, you generally want it to offer a lot of popular music, and between Universal Music and EMI, they control a huge portion of that market — much of it historical back catalog stuff, but also some of the more popular mega-acts today.

According to Paul Vidich, a former Warner Music executive who closed the iTunes deal, the pending merger between Universal and EMI could put an end to that state of affairs.

“Without a UMG-EMI license, they won’t have a business,” said Vidich, referring to new digital startups. “Within the new UMG-EMI there will be only a handful of senior executives who make these key licensing decisions. So this small group will become the gatekeepers for music startups that require these licenses. The psychology, pay packages and strategic interests of these executives will have an outsized impact on diversity and innovation in the entire online music industry.”

That does not bode well for the online digital music marketplace.

So I’m confused. I hear nothing on TD but how irrelevant the labels are. And how they are soon going out of business, etc. And now the merger of two of these labels is cataclysmic for the future of the digital music market? So which is it?

Lowestofthekeys (profile) says:

Re: Re:

“irrelevant” is kind of a broad word to be using.

I think the pattern is more that the labels are disconnected from reality and their consumers, which in turn is bad when they carry so much control over the investment in start ups. A VC is less likely to put money into something when they know the labels can charge whatever they want for a catalog of music.

Anonymous Coward says:

Re: Re:

For new artists, they’re increasingly irrelevant; you don’t have to use the, and you can still be successful. But, for decades, they were the only option. Coupled with the ridiculous copyright terms – another TD favorite – the major labels still control virtually all music produced in the last century, and with their advertising muscle have a good amount of the current popular material as well. This means that if you want people to use your service, you still need their buy in to have a viable offering.

The “industry” part of music industry has switched from being about producing music to distributing music. For their old purpose, they are increasingly irrelevant; for those looking to grow a new industry with hitherto unimagined ways to allow end users to consume music, they’re unavoidable dead weights you have to drag on your way to building a service.

Frankly, if it’s only costing $2,000,000,000 for the takeover, you have to wonder why apple, google, even facebook didn’t just grab them instead and turbocharge whatever services they might build.

MrWilson says:

Re: Re:

Irrelevant isn’t the same as powerless. The kid who owns the only ball in the neighborhood can throw a fit and take his ball and go home and ruin the game for everyone else, regardless of whether or not he realizes that the rules of the game have changed whether he wanted them to or not. And that doesn’t even address the fact that he obtained “ownership” of the ball through lobbying and lawyering and bribery and unscrupulous business practices and is now trying to stop anyone else from using new technology to make their own balls so they can play without having to attend to the delicate ego and temper tantrums of a petulant child.

Wow. That analogy went a lot further than expected…

Danny says:

Here's the thing though...

There is a part of me that thinks that the complaints against this deal are a bit overblown, seeing as it’s about linking up two dinosaurs who’ve failed to adapt — and bringing them together won’t fix any of the major problems those two labels face. But there are some very real concerns about how this could impact innovation online.
That “impact” on innovation is going to come in the form of these two dinosaurs coming together to form an entity that, while unable to totally stop the changing state of music distribution and creation, can slow it down to a claw as they fight tooth and nail to keep their old dominance.

It’s something like this.

It is generally believed that the dinosaurs were killed by a meteorite that crashed on the earth, creating an environment that they could not survive in.

That’s a world changing event and I would like to hope that it won’t take something quite so drastic to get rid of these musical dinosaurs.

If these old entities keep struggling much longer could we end up with a world where we celebrate the passing of the old ones followed by calculating the costs of rebuilding the world after the near cataclysmic event that finaly brougt them down?

Ralph (profile) says:

fixed

That does not bode well for the online LEGAL digital music marketplace.

They are just leaving money on the table as far as I am concerned.
There is no way I am going to subscribe to a music service so they can:
1. Spy on what I am listening to.
2. Bombard me with ad’s.
3. Delete my music library “because they can”.
4. Many other reasons I am too lazy to list.

So I will just continue to swap with friends and torrent the rest.
If more bands would have a contribute page or sell direct I would support them. Unfortunately, most of them are also electing to leave (my) money on the table.

Pjerky (profile) says:

I have been wondering something for awhile now

So I have been wondering something for a while now. Why can’t startup companies team up with non-RIAA labels that are not owned/controlled by the big 3 (or is it two now?) labels to form a new music group. This new group would never play/perform music from artists under the RIAA/EMI/Universal umbrella at all. They would have their own music.

This new organization can just completely ignore the old regime and establish its own new rules. It could set fair and competitive rules and rates that can adapt quickly to a changing world. It can help artists self-promote and give them tools and knowledge for this and for social media and for an online presence.

This new organization could sell only music from member artists and can allow pay-what-you-want models and loose licensing schemes.

Is all this possible? What is stopping this from being done (aside from motivation and inspiration)?

That One Guy (profile) says:

Re: I have been wondering something for awhile now

What’s stopping it? Probably the knowledge that it would be sued into oblivion the second it started to look like it even might pose a threat to the RIAA.

Remember, in today’s rules, you don’t actually have to be breaking the law to be destroyed by lawsuits, your attacker just has to be willing to pay enough to bury you under court fees(Veoh anyone?).

Beech says:

Re: I have been wondering something for awhile now

I have been wondering about this kind of thing. But not taking it quite so far as not using any big label music.

I hear frequently about how much Pandora has to pay for their licenses, and how they may never be profitiable because of them. So why not negotiate better terms with smaller inde labels? “Hey, I need to pay Universal five cents every time I play one of their songs. How about I only have to pay you (you are a small inde label) 1 or 2 cents a song and change my algorithm so it’s a lot more likely to play your stuff.”

Basically find people (labels, bands, etc) who are willing to be paid little to nothing to have their music advertised for free (or cheap) on pandora. Then pandora can favor their music over the stuff that costs them more. Kind of like the PromoBay. Less money per play is good for pandora, more play time is good for smaller acts. Win/win, no?

Anonymous Coward says:

Re: I have been wondering something for awhile now

So I have been wondering something for a while now. Why can’t startup companies team up with non-RIAA labels that are not owned/controlled by the big 3 (or is it two now?) labels to form a new music group. This new group would never play/perform music from artists under the RIAA/EMI/Universal umbrella at all. They would have their own music.

This new organization can just completely ignore the old regime and establish its own new rules. It could set fair and competitive rules and rates that can adapt quickly to a changing world. It can help artists self-promote and give them tools and knowledge for this and for social media and for an online presence.

This new organization could sell only music from member artists and can allow pay-what-you-want models and loose licensing schemes.

Is all this possible? What is stopping this from being done (aside from motivation and inspiration)?

According to Masnick, that is not possible, stating that because of the merger and the new guy in charge:

And he’s now basically the guy with veto power over any new music service.

Puzzlingly, Masnick also claims that the labels, including this new, merged one is unnecessary for new artists to succeed:

They’re irrelevant for new artists who want to succeed. You don’t need them.

So while I agree with you that it sounds like a good idea, I suspect that no one can figure out how to capitalize such an enterprise using the “got any spare change?” business model.

Anonymous Coward says:

Re: Re: I have been wondering something for awhile now

You… didn’t even read the article, did you? This had nothing at all to do with starting new labels. Of course if you admitted that you’d have to admit that you were a bald-faced liar, so I don’t expect that of you.

This article was about distribution (iTunes, for example, which is stated RIGHT IN THE ARTICLE).

Let me give you an example: UMG-EMI sells apples and oranges. The indies sell grapes and peaches. You want to open a fruit stand to sell as many different varieties as you can, that only makes sense. Grapes and peaches are great, but there’s much more demand for apples and oranges, so you have to make a deal with UMG-EMI in order to get those apples and oranges and the rights to sell them.

Anonymous Coward says:

Re: Re: Re: I have been wondering something for awhile now

You… didn’t even read the article, did you? This had nothing at all to do with starting new labels. Of course if you admitted that you’d have to admit that you were a bald-faced liar, so I don’t expect that of you.

I did read the article. The italicized text was from Pjerky’s post. Did you really think that I made up the italicized text for the purpose of answering it? Are you now going to admit that you are a bald-faced dope?

Suzanne Lainson (profile) says:

Re: I have been wondering something for awhile now

I’ve thought this should happen for awhile now. If the major labels don’t want to deal with you or charge you too much, just play artists who allow you to play their music for free.

In fact, I don’t have any sympathy for a startup that knows licensing with major labels with be costly, goes ahead anyway, and then complains after the fact that licensing is killing them.

The usual response is that no music service can survive without major label music because that’s what the consumers/fans want to hear. But if enough people really do believe there is quality music outside the major label system, a DIY/indie service should be able to attract enough listeners to make it worthwhile.

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