Universal Music has announced a deal to buy Downtown Music Holdings, which owns FUGA, CD Baby, Songtrust and Downtown Artist & Label Services, among other things.
The deal, instigated by Universal’s distribution and label services business Virgin Music Group, is worth $775 million and is subject to regulator approval. It will definitely be a cause of concern for the independent label community, as it makes the dominant player in music rights even more dominant, and comes just two months after the major confirmed it had bought European distributor [PIAS] outright.
Indeed, the CEO of the UK’s Association Of Independent Music, Gee Davy, has already formally voiced that concern. Noting how this deal closely follows on from the recent [PIAS] announcement, she says the Downtown transaction “plays into a continuing trend towards over-consolidation and reduction of independent routes to market”.
“It is vital to uphold a true choice of partners for artists and labels and ensure that negotiating power does not become unbalanced”, she adds. “Only in this way can homegrown artists and businesses access fair deals, investment and growth”.
It’s possibly because Universal is aware of the opposition this deal is likely to face that it is keen to push Virgin Music forward as the deal-maker on its side - rather than the parent company - issuing a statement without the customary self-aggrandising “win-win” waffle from UMG boss Lucian Grainge.
Instead its Virgin Music Group co-CEO JT Myers who says that the Downtown leadership have built “one of the most diversified and respected operations in the world”. Combining Downtown with Virgin, he adds, “enables us to expand on the Downtown legacy and offer the independent music community a dynamic and innovative global infrastructure both in terms of service offering and territorial footprint”.
Justin Kalifowitz, founder of Downtown Music Holdings - which began as a music publisher before shifting into publishing and label services, and which has been seeking a buyer for a while - says the deal is “a tremendous recognition of the importance and vitality of independent music, and the value that our company brings to its clients every day. Downtown was established with the belief that artists and entrepreneurs everywhere and at every stage are entitled to the same tools and opportunities to succeed”.
Given Universal has been busy trying to freeze grassroots artists out of the digital royalty pool in recent years, it will be interesting to see how committed Virgin Music is in the long-term to Downtown’s CD Baby, one of the industry’s longest established DIY distributors.
However, in FUGA, Virgin has acquired a company that is a key partner for many independent music businesses, which is one of the reasons why the deal could face strong opposition in the US and especially Europe as it goes through the regulatory process.
Obviously Warner Music has also been sniffing around for distributors to buy, and having pulled out of a deal to snaffle up Believe earlier this year, Universal’s acquisition of Downtown now locks out one of its most likely targets. With the landscape of truly independent distributors who have meaningful market share contracting rapidly as a result of Lucian Grainge and his team buying up everything with a pulse, it is now interesting to speculate what Warner’s next move might be.
However, if this new deal is held up by regulators, and potentially results in Universal having to sell off parts of the Downtown empire to get the transaction across the line, it may be that it has a ready buyer in the shape of Warner. Of course, there is some previous there - when Universal was forced to sell off Parlophone to get regulatory approval for its purchase of EMI, it was Warner that took the legendary British label off Universal’s hands.
