Independent music labels, who have seen their market share come under pressure in the last decade as the industry goliaths merged, have struck back.
After a lengthy court battle, a European court surprised just about everyone by annulling the European Union’s approval of the 2004 Sony BMG merger, which created the world’s second-biggest music company.
“It’s a landmark victory for the small players in the industry who together amount to the largest constituency,” said Alison Wenham, chief executive of the Association of Independent Music. “I think inevitably it’s going to put severe pressure on any other majors’ attempts to merge in order to increase their market power.”
Independent labels, home to artists like the White Stripes, Arctic Monkeys and Franz Ferdinand, typically lack the geographical breadth and marketing clout of their larger rivals. Taken together, the 2 500 independent labels have a slightly larger market share than Universal Music, the industry leader.
The EU’s Sony BMG ruling was challenged by Impala, an umbrella group representing independent labels and publishers, and its success has not only called the Sony BMG deal into question but put a likely freeze on merger talks between EMI and Warner Music, the third- and fourth-ranked majors.
“The indies have really punched above their weight,” said Paul Brindley, managing director of the digital music consultancy MusicAlly. “It shows that despite having very scarce resources, the indie labels can have a major impact and make their voices heard.”
It was not the first victory for independent music groups. In 2000, lobbying from Impala and other groups helped torpedo an earlier proposed EMI-Warner Music merger. But until Thursday’s ruling, the industry looked to be heading toward three majors, down from six in 1998.
What will happen next — for Sony BMG, for Warner and EMI, and for the industry — is far from clear.
The European Commission has two months to appeal the ruling by the European Court of First Instance, or it can re-examine the Sony-BMG deal based on the court’s instructions and the current market conditions.
Either option would have an uncertain outcome and would take many months. In the meantime EMI and Warner Music are unlikely to pursue a deal in such an unpredictable regulatory environment.
With three of the four majors thrown into chaos — Universal Music is the exception — it was a day for the indies to savour their David-versus-Goliath victory.
“We have proved that, by acting collectively, we can challenge the unchallengeable,” said Impala President Patrick Zelnik.