UK competition watchdog raises concerns over Sony Music’s acquisition of AWAL

The UK’s Competition and Markets Authority (CMA) has ruled that Sony Music’s purchase of AWAL from Kobalt Music Group raises competition concerns.

The market watchdog announced that it was launching an investigation earlier this year when news emerged of the acquisition, which included both AWAL and Kobalt’s neighbouring rights divisions.

In its findings, the CMA highlighted the deal’s potential to reduce competition within the sector, noting the possibility of “potentially worsening the deals on the table for many music artists in the UK, and leading to less innovation across the industry”.

The regulatory body also revealed that AWAL was well-situated financially, and that had the purchase not taken place, the label would have been able to compete more strongly against Sony in the near future.

Additionally, the CMA found evidence that Sony was already gearing up to expand The Orchard to focus on emerging artists, in turn providing further competition against AWAL.

“AWAL was well-placed to grow its business even further in the coming years,” the CMA wrote.

“There is also evidence that Sony intended to expand The Orchard’s offering, focussing more on the emerging pool of smaller artists, which would have led it to compete more with AWAL.”

According to the CMA, competition between AWAL and Sony Music could have benefited artists by improving terms for distribution deals, noting that AWAL was an “important emerging player” and one of the few independent bodies that had “succeeded in gaining a meaningful foothold in the market”.

Sony must now address the CMA’s findings within five days to avoid being referred for an in-depth Phase 2 investigation.

In a statement issued in response to the CMA’s findings, Sony Music Entertainment labelled the watchdog’s claims “perplexing” and said the findings were based on a misinformed judgement of the distribution sector.

“This decision by the CMA is perplexing and based on an incorrect understanding of AWAL’s position in the UK,” Sony’s spokesperson said.

“We strongly believe this transaction is unambiguously pro-competitive and that our investment in AWAL is key to its continued growth, and future success.