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Warner will fight Universal’s EMI takeover, says outgoing Chairman

By CMU Editorial | Published on Wednesday 1 February 2012

On his final day as Chairman of the Warner Music Group, Edgar Bronfman Jr confirmed the third biggest music rights company in the world would join with the independent sector to lobby against the proposed merger of the EMI record companies with the market leader Universal Music Group.

Of course Bronfman isn’t necessarily in a position to confirm Warner’s intent on the Universal/EMI merger, his influence at the music firm being nominal since he stood down as CEO last August following the company’s acquisition by Access Industries last May. However, the man who led the Warner music enterprise from 2004 to 2011 will stay on the company’s board of directors, so it seems unlikely he’d speak out against Universal’s EMI deal in such strong terms if his personal opposition wasn’t also company policy.

At a swan song Q&A as part of an AllThingsD conference in California, Bronfman said that allowing Universal to take ownership of the EMI record companies “would create what I call a super-major that would control not only the future of recorded music but the future of all digital media”. According to the Wall Street Journal, he continued: “I think it’s dangerous, I think it’s problematic and I think it’s got to be stopped. It does strike me as hubris, particularly for Universal to think it’s going to be easy to buy EMI, and frankly to think they can buy EMI at all”.

He concluded “Warner is going to fight this tooth and nail”, saying the company planned to lobby against the merger in both the US and Europe, where competition regulators must approve the deal. As previously reported, earlier this month the Legal Times noted that Warner had recently hired the services of American legal firm Brownstein Hyatt Farber Schreck seemingly to work on anti-trust matters, which suggested they were planning to oppose the EMI deals, in the US at least.

Of course Warner, and Bronfman personally, could be accused of just being bad losers if they now try to block Universal’s EMI purchase. Bronfman tried for years to engineer a merger of Warner and EMI, initially in totality, and later, when cash became harder to come by, by bidding against Universal for the EMI record companies.

Indeed, after Warner itself had been sold to Access and Bronfman stood down as CEO, he stayed on primarily to coordinate a merger of the Warner and EMI record companies. But even with the cash reserves of billionaire Access owner Len Blavatnik, Bronfman was unable to bid higher than Universal, who Access believe overpaid for the EMI sound recordings business.

But Bronfman insisted that his opposition to Universal’s expansion was based on general concerns for the future of the music industry and artist community, adding that had EMI and Warner merged – even in their entirety – Universal Music would have still been the biggest music company in the world. (The other little irony here, of course, is that Universal in its current form was a Bronfman Jr creation too, he having orchestrated the merger of the Universal and Polygram companies in the late 1990s).

Elsewhere in his interview, which looked back at his time running Warner Music, he said that his greatest regret wasn’t failing to combine the company with EMI, but his misjudgement regards the speed with which the mobile phone would become the dominant content device, which he admitted he had expected to happen much sooner after he led a consortium to buy Warner in 2004. The iPhone had begun that transformation, he added, but Apple’s competitors still had some way to go, and he had expected the mobile companies to become serious business partners for the big music firms much sooner.

On his company’s relationship with the tech community – Bronfman’s Warner gained a reputation for being most resistant to new digital services – he had positive words about Apple and Spotify, but remained cautious about Google, echoing the opinion of U2 manager Paul McGuinness at MIDEM last weekend. He said Apple had benefited most from its partnership with the music industry, but that iTunes has been important for the labels too.

Despite having once expressed concerns about Spotify’s freemium model, he said yesterday that the streaming service was “ultimately beneficial to the artist”, backing his counterparts at other major labels who maintain having catalogue on the streaming platform does not harm iTunes-style download sales. He also spoke positively about Amazon, despite Warner – like all the majors – responding negatively to the mail-order site’s decision to launch an unlicensed digital locker last year.

But on Google, Bronfman was less committal, but implied ongoing concerns. This was hardly surprising, given Warner is the one hold out on the Google Music service (despite being the first to licence YouTube, albeit before Google’s acquisition of the video site). He said neither he nor Warner “had a beef” with Google, but added that he felt the web giant hadn’t yet properly decided whether or not it wanted to be a true content platform, or just a company that helps users organise their content, and that was reflected in their dealings with the music companies.

According to MediaBeat, he mused: “Google has a conflicted ideology around content that dates back to its origins as a company focused on the value in the organisation of content and not the content itself”. But, he concluded, in the ideal world he’d like to see Warner licence Google’s music ventures in due course.