The Competition and Markets Authority has provisionally cleared Sony Music’s $430m acquisition of independent record label AWAL.
The watchdog had initially raised concerns that the acquisition could lead to increased prices or a worse deal for artists.
However, it said on Friday that it has concluded the deal does not substantially reduce competition in the UK and may not be expected to do so in the future.
The CMA noted that Sony is one of the three 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, it 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, meanwhile, 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 focused its inquiry on the two main areas in which the firms’ businesses overlap, assessing 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 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,” it said.
“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.”
