Sony Music’s purchase of AWAL gets provisional clearance in U.K., Impala ‘remain concerned’

IMPALA, the pan-European independent labels trade association, is considering its next move after the U.K.’s competition authority provisionally cleared Sony Music’s acquisition of AWAL and Kobalt Neighbouring rights businesses.

The Competition and Markets Authority (CMA) last Friday (11 February) gave a provisional green light on Sony’s acquisition from Kobalt Music Group Limited, following an in-depth merger inquiry.

The latest announcement follows the CMA’s referral of Sony Music’s acquisition of AWAL for a Phase 2 investigation on 16 September 2021, after identifying “competition concerns” during its Phase 1 probe.

The following month, IMPALA submitted comment on the proposed deal, said to be worth US$430 million.

However, the authority has now provisionally concluded that the deal doesn’t “substantially reduce competition” in the U.K. and may not be expected to do so in the future.

“Through our inquiry, we have developed a detailed understanding of how Sony and AWAL compete,” comments Margot Daly, Chair of the independent CMA Inquiry Group.

“We have carefully assessed whether this merger will lead to negative outcomes for the market, artists and, ultimately, music fans, now and in the future.”

The CMA’s provisional finding is that “the deal is not likely to affect competition in a way that will reduce the choice or quality of recorded music available, or increase prices.”

Also, adds Daly, “we think that a combination of other major labels and independent providers will continue to closely rival Sony, so our provisional decision is to clear the merger.”

Before making a final decision, the CMA will have to assess evidence provided by stakeholders, who can comment on the provisional findings by 4 March, 2022.

“It’s a provisional set of findings, so we will comment in time for the CMA’s deadline of 4 March, with their final decision due later in March,” comments IMPALA’s Helen Smith.

“We remain concerned that this acquisition will have a negative effect on competition and of course for artists, independent music companies and consumers.”

“We will read the CMA’s arguments with care and will consult our members again to get their views on the specific rationale applied by the regulator,” notes Smith, “so we can provide as useful input as possible. The case also highlights the need for the independent sector to have options when it comes to accessing finance.”

A final decision must be made by 17 March, the date of the statutory deadline.

Following its Phase 1 probe, the CMA found that the distribution of recorded music in the U.K. is currently “highly concentrated,” with the three major labels accounting for the majority of the market and the independent sector handling the remainder, though Sony responded to saying that outcome was “perplexing and based on an incorrect understanding” of AWAL’s position in the U.K. 

AWAL works with the likes of breakthrough indie artist Girl in Red and U.K. chart toppers The Wombats, plus Aussie acts Spacey Jane and Nick Cave and the Bad Seeds.

The CMA is currently making a deep-dive into the machinery of the recorded music industry and its distribution partners.  

As previously reported, the regulator recently launched a separate, landmark probe into music streaming, paying particular attention to the roles played by record labels and music streaming services.

This article originally appeared on The Industry Observer, which is now part of The Music Network.