Tuesday, January 31st, may have marked Edgar Bronfman’s final day as chairman of Warner Music Group, but that didn’t stop him from making one more promise regarding the label’s future plans on his way out. In an interview with Peter Kafka at the “D: Dive into Media Conference,” Bronfman had some choice words regarding Universal Music Group’s scheduled purchase of EMI’s recorded music division. Not only did he publicly call Universal’s plan “dangerous,” “problematic,” and a deal that “has got to be stopped,” Bronfman showed no hesitation in promising that, even after he steps down, Warner Music Group will be fighting the Universal-EMI merger “tooth and nail.”
To recap—Back in November, Citigroup, Inc., the owner of EMI, agreed to two deals that would split the historic British music company into two entities, each to be sold to separate buyers. A consortium led by Sony agreed to buy EMI’s music publishing division for $2.2 billion, while Universal would acquire EMI’s recorded music wing for a cool $1.9 billion. Although the deals are complete as to the parties, they are nowhere near finalized due to the regulatory hoops through which EMI, Sony, and Universal must jump. The parties will need the approval of both the FTC and the European Commission to move forward with the deal, and due to the FCC’s recent scathing analysis of the AT&T/T-Mobile merger, the bar for passing regulatory hurdles on major mergers in the U.S. has just been set a little higher. In total, the regulatory investigation of the Universal-EMI sale is expected to last anywhere from ten to twenty months. It will be in this time period that Bronfman vows Warner will lobby against the deal.
At its core, Bronfman’s promised crusade against the Universal-EMI merger is based on market control. He claims that the Universal-EMI combination will create a “super-major,” that has the ability not only to decide the future of recorded music, but also all other kinds of digital industries. According to Bronfman, the EMI acquisition will put Universal’s market share above 40% (Reuters reports 36%), which in turn will drive down the economics of artists’ deals.
Although Bronfman’s reasons for opposing the Universal purchase are valid (and shared by others in the industry), there is a personal dimension to this battle that should have many questioning the motives for his uncharacteristically public disdain of Universal’s end of the deal. For the past decade or so, Warner Music has tried on multiple occasions to purchase EMI. In fact, just before the Universal-EMI deal settled in November of last year, Bronfman led Warner to the front of the pack of interested buyers yet again, but failed to close the deal. So, is the public denouncement of the Universal deal just the bitter observations of a sore loser? Bronfman assures us otherwise. In distinguishing Warner and Universal’s attempts to purchase EMI, Bronfman points again to market control. He claims that a Warner-EMI merger would not even add up to the current market percentage already controlled by Universal alone. While there is truth to these numbers, the way in which Bronfman criticized Universal, while leaving Sony (who will also be getting a boost in the market share) relatively unmentioned, certainly shows his subjectivity on the issue.
Bottom line, all that Bronfman’s statements mean going forward is that Warner will be in touch with both the FTC and the European Commission as the two agencies inspect the regulatory soundness of the Universal-EMI-Sony deal. This lobbying effort, however, does not come as a surprise to the music industry as it is standard for competitors to petition in these instances. Thus, although Bronfman voiced a whole list of predictable problems with the deal, the fact that he did so in a public forum with little self-restraint as to word choice is what makes this interview so controversial. In short, it’s not about what he said, but all about how he said it.