Market Insight

Parlophone label acquired by Warner Music Group

July 01, 2013

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The sale of Parlophone by the Universal Musical Group (UMG),a division of Vivendi SA, to Warner Music Group (WMG) has been completed for £487m. The deal gained regulatory approval in May 2013 and follows UMG's £1.2bn acquisition of EMI Music's record label business that was completed in September 2012.

The labels that Warner agreed to acquire also include Chrysalis Records, EMI Classics, Virgin Classics and some of EMI's European regional labels. The divested assets are believed to constitute in the region of 30 per cent of the business that UMG acquired from EMI.

Universal was required to divest a significant share of EMI 's label business as a condition of acquisition in 2012 as European regulators viewed that there would be a reduction in competition as the number of major music labels was being reduced to three (UMG, Sony and WMG). The result was widespread speculation that the £1.2bn acquisition would come to look like a bad deal for UMG as the requirement to sell would reduce the rate it could get for Parlophone. This speculation now seems to be misplaced with Warner paying something broadly in line, or perhaps a little higher, than Parlophone's share of the EMI label business.

WMG's acquisition was cleared as the Commission viewed that it would increase Warner's ability to compete with for UMG and Sony Music. Competition should also be bolstered by an agreement between WMG and IMPLAA and Merlin for WMG to undertake structural and financial measures that would likely strengthen the independent music sector. It has been reported that between 25-33% of the value of the Parlophone label will be disposed to the indie sector to be bought, licensed or distributed.

However, Universal music has kept some key catalogue music that still retains value after a 2011 extension to music copyright from 50 years to 70. With Universal managing to retain the Beatles catalogue, that originally were part of the Parlophone Label, they can still leverage revenue from this older content. 

UK World
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