REG - Competition and Mkts - CMA clears Sony’s acquisition of AWAL

SonyAnnouncement

16/03/2022 15:01

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RNS Number : 9810E  Competition and Markets Authority  16 March 2022

 

CMA clears Sony's acquisition of AWAL

 

The CMA has cleared Sony's acquisition of AWAL, an 'artist and label'
(A&L) services provider, following an in-depth merger inquiry.

 

The Competition and Markets Authority (CMA) referred the merger to an in-depth
Phase 2 inquiry in September 2021, after identifying competition concerns
during its initial Phase 1 investigation.

 

In February 2022 the CMA provisionally concluded that the deal does not
substantially reduce competition in the UK and may not be expected to do so in
the future. Following a consultation that ended on 4 March 2022, the CMA has
upheld its provisional findings and cleared the deal.

 

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's inquiry focused on the two main areas in which the firms' businesses
overlap. It assessed the extent to which The Orchard and AWAL may be expected
to compete to provide A&L services. It also looked at how closely Sony and
AWAL may be expected to compete to sign successful artists, and those with the
potential to become successful, where higher levels of support and investment
are provided.

 

The CMA 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.

 

As part of its assessment, the CMA considered a wide range of evidence,
including thousands of internal documents from both firms, evidence submitted
by their competitors and customers, and its own analysis of market conditions.

 

Margot Daly, Chair of the independent CMA Inquiry Group, said:

 

"We launched this inquiry as we wanted to be sure that this deal wouldn't lead
to worse outcomes for artists and fans. The music industry is vital to the UK
economy and effective competition ensures that it works for everybody.

 

"Having carefully assessed the merger we found that it is not likely to affect
competition in a way that will reduce the choice or quality of recorded music
available or increase prices."

For more information, visit the Sony / AWAL merger inquiry page
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fcma-cases%2Fsony-music-entertainment-slash-kobalt-music-group-merger-inquiry%23administrative-timetable&data=04%7C01%7CPeter.Swift%40cma.gov.uk%7Ca9de1fa3c1894fbd428108da05bfab0a%7C1948f2d40bc24c5e8c34caac9d736834%7C1%7C0%7C637828617999748265%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=rmrE2UbORahLCwV74y6P3yNjLpnBnSnSArMhToF3LRw%3D&reserved=0)
.

 

The CMA is committed to making sure markets are working well for music fans
and recently launched
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fcma-cases%2Fmusic-and-streaming-market-study&data=04%7C01%7CPeter.Swift%40cma.gov.uk%7Ca9de1fa3c1894fbd428108da05bfab0a%7C1948f2d40bc24c5e8c34caac9d736834%7C1%7C0%7C637828617999748265%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=xyc1fcndhB07kXAy8qjuV5AUP7I9pcdJ47zgw8djQF0%3D&reserved=0)
a separate probe into music streaming, paying particular attention to the
roles played by record labels and music streaming services.

 
Notes to editors

 

1.   All the CMA's functions in Phase 2 merger inquiries are performed by
inquiry groups chosen from the CMA's panel members. The members of this
inquiry group are Margot Daly (Chair), Paul Hughes, John Thanassoulis and
Ashleye Gunn. The CMA's panel members come from a variety of backgrounds,
including economics, law, accountancy and/or business; the membership of an
inquiry group usually reflects a mix of expertise and experience.

2.   The CMA ran a 3-week consultation on the provisional findings up to 4
March 2022, during which time anyone could make submissions to the CMA. The
responses are published on the merger inquiry page
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fcma-cases%2Fsony-music-entertainment-slash-kobalt-music-group-merger-inquiry%23administrative-timetable&data=04%7C01%7CPeter.Swift%40cma.gov.uk%7Ca9de1fa3c1894fbd428108da05bfab0a%7C1948f2d40bc24c5e8c34caac9d736834%7C1%7C0%7C637828617999748265%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=rmrE2UbORahLCwV74y6P3yNjLpnBnSnSArMhToF3LRw%3D&reserved=0)
.

3.   The CMA is the UK's primary competition and consumer authority. It is
an independent non-ministerial government department with responsibility for
carrying out investigations into mergers, markets and the regulated industries
and enforcing competition and consumer law.

4.   The CMA launched a separate market study into music and streaming
services
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fcma-cases%2Fmusic-and-streaming-market-study&data=04%7C01%7CPeter.Swift%40cma.gov.uk%7Ca9de1fa3c1894fbd428108da05bfab0a%7C1948f2d40bc24c5e8c34caac9d736834%7C1%7C0%7C637828617999748265%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=xyc1fcndhB07kXAy8qjuV5AUP7I9pcdJ47zgw8djQF0%3D&reserved=0)
on 27 January 2022.

5.   For media queries, please contact the press office via press@cma.gov.uk
(mailto:press@cma.gov.uk) or on 020 3738 6460.

 

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