Sony’s Acquisition of EMI’s Music Publishing Business

In April 2012, the European Commission cleared Sony’s acquisition of EMI’s music publishing business, subject to conditions. The merger creates the largest business of its kind and reduces the number of so-called global ‘major’ publishing companies from four to three. The clearance was made conditional upon the divestment of EMI’s publishing rights to four catalogues and the works of 12 contemporary artists. Jorge Padilla, Peter Davis, David Shaharudin, and Luke Ravenscroft from Compass Lexecon assisted EMI and its owner Citigroup, as well as their respective legal advisers, Freshfields Bruckhaus Deringer LLP and Clifford Chance LLP. The Commission’s decision followed its initial (‘Phase I’) investigation. The Commission was initially concerned about the merged entity’s ability to control the online licensing of chart hits in the European Economic Area. Post transaction, the merged entity would have fully or partially owned publishing rights in more than half of the chart hits in the UK and Ireland. However, Sony offered divestments of valuable and attractive catalogues, satisfying the Commission that the competitive dynamics in the online music publishing business would be maintained. Compass Lexecon worked with Tony Reeves and his team at Clifford Chance LLP and Thomas Janssens and his team at Freshfields Bruckhaus Deringer LLP.

In June 2012, the Federal Trade Commission cleared Sony’s acquisition of EMI’s music publishing business. The merger of the two company’s music publishing catalogs created a library of more than two million songs, making the combined entity the world’s largest music publisher. Janusz Ordover and Doug Fontaine from Compass Lexecon assisted Sony ATV (Sony’s music publishing division), as well as its counsel, Debbie Feinstein, Chester Choi, and Michael Bernstein of Arnold & Porter LLP. Bobby Willig, Jith Jayaratne and Yair Eilat assisted EMI and its counsel, Dale Collins, Tim Haney, and Jessica Delbaum of Shearman & Sterling LLP in this transaction. The FTC approved the merger once satisfied that the combination of the two enterprises likely would not harm competition in any of the numerous business segments in which music publishing rights are licensed. Compass Lexecon worked with counsel to prepare a white paper that addressed the principal competitive concerns raised by the FTC, namely the parties’ withdrawal of digital performance rights from the U.S. performing rights organizations and the parties’ possibly enhanced control over the publishing rights associated with “hit” songs. With regard to both concerns, economic analyses and arguments prepared by Compass Lexecon persuasively demonstrated that such concerns were unwarranted due to continuing robust competition among music publishers, including the need to both maintain and replenish relationships with songwriters, and the material bargaining leverage held by numerous digital service providers.