The Competition and Markets Authority (CMA) referred the merger to an in-depth Phase 2 inquiry, after identifying competition concerns during its initial, Phase 1, investigation.
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Having examined the merger, the CMA has provisionally concluded that the deal does not substantially reduce competition in the UK and may not be expected to do so in the future.
Sony is one of the 3 major record labels active in the UK today, along with Warner and Universal Music Group. In addition to its main label offering, Sony Music Entertainment, Sony also owns The Orchard, an A&L services provider.
A&L services typically cover promotion, marketing and distribution and allow artists to retain full ownership of their copyrights and a greater percentage of royalties. A&L contracts also tend to provide a narrower set of services with less financial support and shorter-term contracts than traditional record contracts.
AWAL is an emerging music distributor offering an alternative to traditional music deals by providing both A&L services and a ‘DIY platform’ that allows artists to upload their own music for distribution.
The CMA has provisionally found that, while not currently competing closely due to their different areas of focus, The Orchard may have become a stronger rival to AWAL in the supply of artist services in future.
However, there are many other providers who will continue to compete effectively with both firms – including independent A&L companies, the A&L branches of the other major labels (like Warner’s ADA and Universal Music Group’s Virgin) and independent labels.
In terms of its rivalry with Sony, AWAL is still a relatively small player when it comes to signing artists who require higher levels of support and investment. Despite trying to expand its offering, AWAL was expected to continue to compete with Sony only on a limited basis.
In the course of its investigation, the CMA also found that many other firms have begun providing similar services which can be expected to make up for the limited loss of competition from AWAL.
The CMA is now asking for views on these provisional findings by 4 March 2022 and will assess all evidence provided before making a final decision. ■