CMA clears acquisition of AWAL by Sony
The Competition and Markets Authority (CMA) referred the merger to an in-depth phase 2 investigation in September 2021, after identifying competition concerns during its initial phase 1 investigation.
In February 2022, the CMA tentatively concluded that the deal did not significantly reduce competition in the UK and is not expected to do so in the future. Following a consultation that ended on March 4, 2022, the CMA confirmed its tentative findings and cleared the deal.
Sony is now one of the three major record labels operating in the UK, 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 service provider. A&L services generally cover promotion, marketing and distribution. They also allow artists to retain full ownership of their copyrights and a higher percentage of royalties. A&L contracts tend to provide a smaller set of services with less financial backing and shorter-term contracts than traditional recording contracts.
AWAL is an emerging music distributor offering an alternative to traditional music offerings by providing both A&L services and a “DIY platform” that allows artists to upload their own music for distribution.
The CMA survey focused on the 2 main areas where companies’ activities overlap. It assessed the extent to which The Orchard and AWAL might compete to provide A&L services. It also looked at the extent to which Sony and AWAL might compete to sign successful artists, and those with the potential to succeed, where higher levels of support and investment are provided.
The CMA found that, although not currently in close competition due to its different areas of interest, The Orchard could have become a stronger rival to AWAL in providing artist services to the to come up. However, many other vendors will continue to compete effectively with both companies – including independent A&L companies, A&L branches of other major labels (such as Warner’s ADA and Universal Music Group’s Virgin), and independent labels.
In terms of 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 its attempts to expand its offering, AWAL was only to continue to compete with Sony on a limited basis. During its investigation, the CMA also found that many other companies have begun providing similar services which should compensate for AWAL’s limited loss of competition.
As part of its assessment, the CMA considered a wide range of evidence, including thousands of internal documents from both companies, evidence submitted by their competitors and customers, and its own analysis of market conditions.
Margot Daly, chair of the independent investigative group CMA, said:
We launched this investigation because we wanted to make sure that this agreement would not lead to worse results for artists and fans. The music industry is vital to the UK economy and effective competition ensures it works for everyone.
After carefully evaluating the merger, we have found that it is not likely to affect competition in any way that reduces the choice or quality of recorded music available or that increases prices.
For more information, visit the Sony/AWAL merger investigation page.
The CMA is committed to making sure markets work well for music fans and recently launched a separate inquiry into music streaming, paying particular attention to the roles played by record labels and streaming services. musical.
Notes to Editors
- All of the AMC’s functions in Phase 2 merger investigations are performed by investigative groups selected from among the members of the AMC’s panel. The members of this investigative group are Margot Daly (Chair), Paul Hughes, John Thanassoulis and Ashleye Gunn. CMA committee members come from a variety of backgrounds, including economics, law, accounting, and/or business; the composition of an investigative group generally reflects a mix of expertise and experience.
- The CMA conducted a 3-week consultation on the draft findings until March 4, 2022, during which time anyone could submit comments to the CMA. Responses are posted on the merge request page.
- The CMA is the main UK competition and consumer protection authority. It is an independent, non-departmental government department responsible for investigating mergers, markets and regulated industries and enforcing competition and consumer law.
- The CMA launched a separate market study on music and streaming services on January 27, 2022.
- For media enquiries, please contact the press service via [email protected] or 020 3738 6460.