Indie Labels Strike Down Sony BMG Merger
Fri, 14 Jul 2006 10:30:32
An independent trade group known as Impala, representing 2,500 indie music labels, has won a surprising victory in the European courts, where judges have struck down the merger between industry giants Sony and BMG, pending a challenge by the European Commission authorities who originally approved the merger two years ago. The European Union's Court of First Instance said that the initial decision to allow the merger had contained a "manifest error" and had not properly considered whether the partnership -- which accounted for more than 25% of American record sales last year -- constituted a monopoly.
"We have proved that, by acting collectively, we can challenge the unchallengeable," said Patrick Zelnik, President of Impala.
After he picked his jaw off the floor, Sony BMG chief Rolf Schmidt-Holtz told his employees not to panic -- yet. Schmidt-Holtz said that the court's ruling "will have no immediate effect on the day-to-day running of the Sony BMG joint venture, which continues business as usual." Sony BMG is home to such top-selling artists as Beyonce, Shakira and the Dixie Chicks.
While most of the power players for the respective companies gave similarly confident statements to the press, batches of anonymous employees were free to express their shock and concern. "Nobody expected this," a Sony BMG executive admitted to the Los Angeles Times.
Meanwhile, a long in-the-works merger of EMI and Warner Bros., considered by many industry insiders to be a foregone conclusion, also appears to be less than guaranteed. An "insider" at Warner Brothers told the LA Times, "Everything is completely on hold now. Overnight, the chances of this deal happening anytime soon just plummeted."
As for the indie labels, they're breaking out the champagne. "It's a landmark victory for the small players in the industry who together amount to the largest constituency," said Alison Wenham 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."
--The ARTISTdirect Staff