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UK competition regulator to investigate Sony’s AWAL purchase
By Chris Cooke | Published on Wednesday 19 May 2021
The UK’s Competition & Markets Authority has launched an investigation into the recent acquisition by Sony Music of Kobalt’s recordings division, which included the latter’s neighbouring rights agency and the AWAL label services business. The regulator served an ‘initial enforcement order’ on Monday.
Sony announced that it was buying AWAL and Kobalt Neighbouring Rights back in February in a deal worth around $430 million. The transaction saw Kobalt refocus its energies on its original song rights administration business, stepping back from music distribution and the management of recording rights.
All three majors have expanded their distribution and services divisions over the years, of course, providing services to other labels and directly to self-releasing artists, alongside their more conventional label operations. But Sony has always been the most prolific in this space via its often acquisitive The Orchard business.
Both The Orchard and AWAL work with both labels and artists, although The Orchard skews to label clients and AWAL to artist clients, so there was a logic to bringing the two businesses under one roof.
Further expanding its distribution business also increases Sony’s total market share, which can be important when negotiating with digital platforms – especially new services – and it gives the wider group ever more usage data to crunch, informing marketing campaigns and business development.
That brings us to possible competition law concerns about Sony significantly expanding its distribution and label services business through one transaction.
The pan-European trade group for the indie sector, IMPALA, had already referenced – and expressed concern about – the boost to market share caused by Sony’s distribution business when opposing the major’s complete buy-out of the old EMI songs catalogue via its music publishing division in 2018.
Though whether those competition law concerns justify any actual regulator intervention on the Sony/AWAL deal remains to be seen. So far the CMA has only announced that it will investigate the deal, providing no other comment on that investigation – even the timeline is to be confirmed.
The competition regulator simply stated: “The CMA is investigating the completed acquisition by Sony Music Entertainment of the AWAL and Kobalt Neighbouring Rights businesses from Kobalt Music Group Limited. On 17 May 2021, the CMA has served an initial enforcement order under section 72(2) of the Enterprise Act 2002 in relation to the completed acquisition”.
Responding to the announcement of the CMA investigation, IMPALA Executive Chair Helen Smith tells CMU: “We welcome the investigation into this acquisition as it leads to further concentration in the music market and is part of an ongoing wider move by Sony to acquire significant independent players in key markets. We expect the investigation to cover both the physical and also digital markets, and the impact on competitors, digital services, artists and fans, who will all lose out”.
