IMPALA says Universal’s “creeping dominance” and “pursuit of key independent players” is a cause for concern after [PIAS] deal

Pan-European indie label trade group IMPALA has urged regulators within the European Union, and beyond, to investigate Universal Music’s acquisition of independent label group and distributor [PIAS] which, it says, “squeezes the independents further in an already very concentrated market”. 

IMPALA says in a statement, “The bottom line is Universal Music Group’s acquisition of [PIAS] will increase the power of UMG across Europe and beyond, including the UK and the USA, and IMPALA expects regulators in these jurisdictions to take action. The pursuit of key independent players by all three majors has been happening in national markets across Europe and elsewhere and there is a serious risk of this continuing and posing real disruption for the independent sector”.

It was announced on Tuesday that Universal now owns [PIAS] outright, having previously acquired a 49% stake in the business from founders Kenny Gates and Michel Lambot. The [PIAS] Label Group will remain an autonomous division within the Universal empire, though the indie’s [Integral] distribution and label services company becomes part of the major’s Virgin Music Group. Integral and Virgin will then provide distribution services to the [PIAS] labels. 

[PIAS] was a key player in the independent sector for decades, and was an active participant in various organisations championing indie labels, including IMPALA. The trade body’s statement acknowledges that, saying that “[PIAS] is an inspiration for all entrepreneurs in music”, and thanking Lambot and Gates “for their support and insight over the past 24 years”. As a Universal subsidiary, [PIAS] will no longer be an IMPALA member. 

The indie sector has long been concerned about the major record companies becoming ever more dominant, partly by merging with each other - so we went from six to three majors between 1998 and 2012 - and also by buying up successful indie labels and distributors. That market power gives the majors an advantage in various ways, especially as the digital market evolves, with the majors exploiting their dominance to skew new business models to their advantage and secure preferential deals. 

All three majors - Universal Music, Sony Music and Warner Music - continue to grow through acquisition, buying up both labels and distributors. 

Sony in particular went through a period of prolifically expanding its distribution and label services business through a series of acquisitions. Warner made attempts to buy Believe earlier this year in a hostile takeover - a deal that ultimately failed - but later appointed former Goldman Sachs banker Michael Ryan-Southern to sniff out other distributors and label services companies it could gobble up.

From 2012 to 2022, Universal was somewhat constrained when it came to acquisitions within Europe as a result of a deal done with the EU competition regulator in order to allay concerns around its purchase of the EMI record company. But those restrictions no longer apply. 

Commenting on the [PIAS] acquisition, IMPALA Executive Chair Helen Smith says, “IMPALA expects regulators to investigate the acquisition and answer the question the industry is asking about how it is possible for UMG to gain more market share after it was already considered too big. We would expect both physical and digital markets to be assessed including for distribution services, as well as the impact on competitors, digital services, artists and fans. A share deal is one thing, this is something else”. 

IMPALA Chair Dario Draštata adds, “This type of creeping power is an issue across Europe. Apart from strengthening UMG in terms of market share, it eliminates a principal competitor and should be investigated. It also narrows options for artists and labels. It is not a question of an arithmetical increase of market share points by one major, but rather a sea change in the competitive dynamics of the music market, to the severe detriment of competitors and consumers”.

Noting that there are concerns about all three majors increasing their market dominance, he continues, “Sony has been doing the same and we see similar moves in Central and Eastern Europe with Warner Music buying stakes in several leading independent music companies across the region. The loss of such big players for the independent sector compounds the competitive impact and the risk is that this trend will continue. We have been signalling the problem of creeping dominance for many years and it’s time for a new competition approach to address this question”.