When French conglomerate Vivendi SA agreed to buy EMI’s recorded music division for $1.9 billion on Friday, it created a new king of the music industry.
But in a music business now controlled by digital distributors, it's not nearly as good to be the king as it used to be.
Universal Music Group, owned by Vivendi, already held 26 percent market share in the music industry, measured in terms of albums sold.
Adding EMI, which controls 9 percent, makes the company by far the biggest label around, controlling a catalog that combines such EMI assets as The Beatles and Beach Boys with such Universal staples as Lady Gaga and Justin Bieber.
“If this [deal] goes through, you’ll have one [label] that’s gigantic -- Universal; one that’s big -- Sony; and one that’s pretty small -- Warner Bros.,” said Robert Levine, author of “Free Ride,” a book on how digitization has impacted industries like music and film.
But Levine and others question whether bigger is really more powerful when digital monoliths like Apple, Google and Amazon are controlling the marketplace far more than the content owners.
Also read: Vivendi Nabs EMI for $1.9B, Getting Rights to the Beatles, Snoop Dogg
“In a business changing so quickly, market share is not as important as some people like to think it is,” Levine said.
An individual close to the negotiations noted that Apple, Google and Amazon now control more than 80 percent of legal music sales. "Does it make Universal more powerful?" asked the music industry insider. "Maybe 10 years ago when the world was different.
“Universal has been No. 1 in terms of market share for the last 10 years,” he said. “How has that helped Universal? Look at its negotiations with Apple -- Universal is not exactly in charge.”
Also read: Citigroup Readies Its Troubled EMI for the Auction Block (Exclusive)
There is little doubt that this deal reorganizes the power structure of the industry. A little more than a decade ago, the music industry was made up of six major labels along with a number of independents. Now one label controls more than a third of the market.
But in today’s economy, the impact of gaining so much market share is murkier.
For one thing, selling albums, as just about everyone knows, is not nearly as lucrative as it once was. While the decline in album sales leveled off this year, the International Federation of the Phonographic Industry (IFPI) estimated in 2009 that 95 percent of global music downloads are illegal.
Still, there is one area where market share may still be quite significant: in negotiations with music services like Spotify.
Said Levine: “Let’s say you’re trying to launch a digital music service. Assuming this deal goes through, the idea of having a music service without this new Universal-EMI label is not much of a music service at all.”
