Friday’s surprising news that music industry giant EMI Group would be split in half and sold to two of its biggest competitors leaves the fate and future direction of EMI’s influential Nashville music institutions in the air.
Universal Music Group is spending a reported $1.9 billion to purchase the label’s recording division, including Nashville-based Capitol Records and its artist roster of country superstars such as Lady Antebellum, Keith Urban and Brad Paisley. The purchase also includes EMI Christian Group, a Nashville label that includes Christian hit makers Amy Grant and Steven Curtis Chapman.
In a separate $2.2 billion deal Sony/ATV Publishing — a joint venture between Sony Corp. and the Michael Jackson estate — is leading a consortium to buy EMI’s publishing divisions. Those holdings include Nashville-based EMI Music Publishing, which controls a vast and valuable catalog of 1.3 million songs by artists such as Rihanna, Adele, Urban and Alan Jackson.
Like EMI, Universal and Sony already have staff, infrastructure and office space in Nashville, raising the possibility that Friday’s deal will lead to further consolidation and job loss in Nashville, where EMI employs between 150 and 200 people.
“You have to assume there will be efficiencies that multiple publishing companies and record labels would need to find,” said Paul Allen, associate professor of music business at Middle Tennessee State University.
The bigger impact, however, could be on the ability of new artists to emerge when four major record labels are reduced to three.
“On a broader scale, consolidating two major labels into one is going to reduce the access points some artists are going to have,” Allen said. “I suspect it’s going to be more difficult for new artists to get beyond gatekeepers because the number of gatekeepers (will be) reduced.”
The two-part sale, if approved by regulators, would further increase Universal Music’s dominance in recorded music and springboard Sony/ATV into the top spot as a music publisher, according to Impala, an association of European independent music companies that is against the deal.
The purchases would give Universal Music and Sony/ATV undue negotiating power over artists and distributors of music, even powerhouses such as Apple Inc.’s iTunes, Impala said.
Both deals are expected to be carefully reviewed in Europe, the United States, Japan and Australia. Even if regulators approve, they could force the sale of key assets or attach other terms.
Representatives of Universal and EMI declined to comment. A representative for Sony did not respond to questions.
Invisible to most?
For consumers and fans, any takeover is unlikely to result in a visible impact on the music they listen to or the stars who perform it, at least in the short term, said Vanderbilt University Law School professor Daniel Gervais, an expert on intellectual property law.
But consolidating ownership into the hands of three major record labels instead of four means those three companies will have a larger hand in deciding how music is sold to consumers going forward.
“Essentially you have three companies that control the music catalog for most of the world,” he said. “That basically means that these companies will decide what business models will be allowed to emerge on the Internet.”
EMI Publishing had recently embarked on a business strategy considered radical in the industry, announcing last summer that it would bypass performing rights organization ASCAP to negotiate directly with digital providers for royalties. None of the other labels followed, and it’s unclear whether that experiment will continue after its takeover.
What may not change much is operations at Capitol Records, EMI’s major record label in Nashville.
The label, led for more than a decade by CEO Mike Dungan, has had a string of major successes in the past three years, signing superstar acts such as Lady Antebellum, which has sold more than 7 million units so far; Luke Bryan, who has sold 1.5 million; and Eric Church, who has sold 400,000 since last year. Those are extraordinarily good numbers for country music, according to Allen.
“Dungan has developed very profitable acts from Nashville,” Allen said. “If anything, the label might be inclined to provide Dungan with more ability to take chances by giving them deeper pockets than they’ve had in many years.”
Just a ‘reshuffling’
For the broader Nashville landscape, and the emerging independent label scene established here, often by people laid off from major labels, the deal probably won’t have a big impact, said Tom Baldrica, a former Sony executive who left to join small Nashville-based startup label Average Joes Entertainment last year.
Universal and Sony will still be giant corporations in a field often criticized over the past 10 years as slow to respond to the rise of the Internet and digital innnovation, he said.
“It’s nothing more than reshuffling of the deck from our perspective,” Baldrica said. “There’s one less dealer, but it’s the same cards. It’s still the same artists. It’s still Lady Antebellum and Dierks Bentley and Alan Jackson. The labels still have to deal with the same economics. We can make money on music by focusing on the cents, not the dollars.”