Universal Music seems set to secure the approval of European Union regulators for its $775 million acquisition of Downtown Music, according to sources who have spoken to Reuters.
Last month the major responded to the European Commission’s competition concerns about the deal by proposing to sell off royalties platform Curve, one of the businesses within the Downtown group.
Citing people “with direct knowledge of the matter”, Reuters says that EU officials have now “signalled acceptance” of that proposal and have “not demanded further concessions”. The news did little to help Universal Music Group’s sliding share price - which has dropped 16.5% year on year.
By buying Downtown, Universal will significantly boost its position in the artist and label services domain, one aspect of the music rights business where it has often lagged behind main rival Sony Music.
The Downtown group includes music distributor FUGA, DIY distributor CD Baby and rights administrator Songtrust, as well as Curve and other teams providing marketing and rights management services. Between them, those companies provide services and support to millions of independent record labels, music publishers, artists and songwriters.
The deal has been strongly opposed by organisations representing the independent label community, who have raised an assortment of concerns about what an even more dominant Universal Music will mean for the wider music rights market.
Universal already has enough market power to pressure the streaming services to evolve their business models to its advantage, for example by introducing payment thresholds. That market power will only increase as it controls even more of the digital supply chain.
Plus Downtown will bring to the major a huge amount of new data to inform marketing campaigns, catalogue acquisitions and A&R decisions - among other things - at a time when data is becoming even more powerful and valuable in the context of AI. For the indies, Universal having access to the various different categories of data that are managed by Downtown businesses is deeply concerning.
However, in the end, it seems that it was one specific category of data that most concerned EU regulators: the fact that, via Curve, Universal would have sight of royalty and contract information belonging to many of its indie rivals. Which is why Universal hoped that a relatively simple remedy - selling Curve - would get the European regulators off its back.
Public confirmation of the EU’s final decision has yet to be made, with the deadline for that currently set at 27 Feb. Though even if the deal does go through, the indie sector will likely continue to urge competition regulators to consider the market power of Universal.
In particular when it comes to changing the streaming business model in a way that benefits the majors, but then also impacts on every label, publisher, artist and songwriter worldwide.
The other question is who will end up buying Curve, a highly respected business that quickly carved a leading position in its niche.
Tom Allen, a co-founder of Curve Royalty Systems, was promoted to Chief Technical Officer of Downtown Music in April last year, where he oversees the company’s “group-wide technology strategy”, while Curve MD Richard Leach was promoted to President of Curve And Downtown Royalties & Financial Services.
Whether those two key members of the company will stay with Downtown after the Universal deal concludes is currently unknown. If they do, then whether Curve is as attractive to a potential purchaser with two key executives off the table is something that only time will tell.