French independent label trade body the Union des Producteurs Phonographiques Français Indépendants - or UPFI - has called on the French government to support Believe against a possible takeover by Warner Music Group. In a statement issued this morning, the UPFI highlights the “potentially devastating consequences” if Warner is allowed to succeed in its proposed hostile takeover of Believe.
“As a distributor of numerous French labels and artists throughout the world, and a key player in our music ecosystem, Believe must remain independent”, says UPFI. Believe “embodies a model of success and resistance to the worrying phenomenon of consolidation at work in the sector that has seen the successive acquisition of many significant distributors”, it adds, highlighting Sony Music’s acquisition of The Orchard and AWAL.
The story so far...
As CMU reported earlier this week, the French financial markets authority AMF knocked back an attempt by the consortium led by Believe founder and CEO Denis Ladegaillerie that sought a waiver of board approval of conditions relating to their bid. That waiver would have effectively accelerated the timeline of their offer and potentially locked Warner out from putting forward its own formal offer for Believe.
Warner had previously issued a formal statement saying that it was informally interested in buying Believe at a suggested price of €17 a share, and suggested that if it was locked out it would call in the French financial markets authority. Believe did this itself, and the AMF quickly came back to say that the “board waiver” was “not compliant” with French takeover regulations.
The AMF also said that Warner should be given access to data necessary to make a formal bid for Believe. The independent board directors of Believe - those directors not involved in the Ladegaillerie bid - then invited Warner to submit an offer to buy Believe, but said that any offer should be “binding, unconditional and fully financed” - and that it needed to be received by 7 Apr. Analysis of recent financial statements filed by Warner shows that although it is likely in a position to be able to acquire Believe at its proposed price of €17 a share, it is potentially more than $300 million short of the cash required to do so.
UPFI's three main concerns
UPFI’s statement continues by setting out three risks that would arise from Warner acquiring Believe. Firstly, it says, music creation in France would suffer as it would mean Believe “abandoning a policy of investing in the local production of new music”.
This is potentially of significant concern within France, with recent numbers from French record industry trade group SNEP and the Centre national de la musique or CNM showing how successful French-produced music is, both within France, but also as a significant part of France’s cultural export.
A report published by SNEP on 12 Mar highlights “the momentum and continuing success of French music production over the last decade”. During 2023, says the report, “Seventeen out of the top twenty best-selling albums and three quarters of the top 200” in France were “projects by artists produced in France - and singing in French”, with emerging French artists also performing strongly, with “twenty four debut albums produced in France” in France’s annual top 200.
That said, Believe and the SNEP have had their own run-ins in the past. In September 2021 SNEP accused Believe of “making it impossible to publish reliable data”. At the time it said that “unlike the main players in distribution, both majors and independents, Believe has for the moment not wished to be transparent about its activities in France”. Believe responded saying, “like a number of other independent players, Believe hasn’t been providing its data to the SNEP for the last several years, and it was never an issue”, before adding “we understand that Believe’s significant market position in the French market makes its data necessary to the completeness and reliability of the market data published by the SNEP”.
The reason this spat is important is that it highlighted the significance of Believe’s market share in France - with the implication that SNEP would not be able to produce accurate figures without Believe’s market data.
However, at the same time, Believe hinted that it was not happy with the way SNEP prepared its numbers, saying “Believe is always ready to participate in the production of market data and artist rankings when produced in an independent, honest and transparent way, in all of its operating countries… We are available to discuss with SNEP how best to achieve these goals in France”. What was remarkable about this statement is that Believe CEO Denis Ladegaillerie had in fact served as SNEP President for two years, from 2010 - 2012.
Those past arguments aside, it is well recognised that Believe has a significant presence in the French market, and is a significant music company both in France and more broadly in Europe.
UPFI concerned about potential job losses if WMG x Believe deal goes ahead
When CMU reported on the most recent developments in the WMG x Believe takeover we pointed out that any takeover by Warner may come with the risk of job losses in France - and highlighted the fact that Warner had recently laid off hundreds of people, many of whom were employed by previous Warner acquisitions.
UPFI agrees that this is a significant risk, flagging that the second of its three concerns relates to employment. In its statement it says “the 600-strong redundancy plan announced in February by Warner Music could reasonably lead to fears of further staff cuts” if Warner were to acquire Believe.
WMG acquisition would intensify global music oligopoly says UPFI
Lastly, says UPFI, WMG gobbling up Believe would be “part of an intensifying shift” in the global music market which, it says is “already largely dominated by an oligopoly of three majors”.
Believe is “one of the few French ‘unicorns’” it adds, which makes it an “important voice of French soft power in the cultural sector”. With nearly 2000 employees globally and offices in key music markets globally, Believe has significant presence and influence for the independent music it champions around the world.
UPFI ends its statement calling on the French government to intervene and “show its support” for Believe, saying that this will help “preserve investment in music, the diversity of business models and France’s cultural and economic sovereignty”.
As CMU pointed out earlier this week, should Warner succeed in its takeover of Believe, this would represent a significant European music company falling under US control, and a further shift in the balance of power in the music business from Europe to the US.
Whether Warner will proceed with a formal bid is still unknown - the US-listed, Access Industries-controlled major has just nine days left to submit its “binding, unconditional and fully-financed” offer for Believe, which must be received by Sunday 7 Apr. If an offer is received and approved by the Believe board, it’s almost certain that there will be more activity on this topic. Whether that comes in the form of an increased offer by the Ladegaillerie consortium, a regulatory inquiry into a Warner bid - or perhaps even an entirely new bid from a company like BMG - only time will tell.
