EN This text is made available for information purposes only. A summary of this decision is published in all Community languages in the Official Journal of the European Union. Case No COMP/M.3333 – SONY / BMG Only the English text is authentic. REGULATION (EC) No 4064/89 MERGER PROCEDURE Article 8 (2) Date: 03/10/2007 COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 03/X/2007 C(2007) 4507 PUBLIC VERSION COMMISSION DECISION of 03/X/2007 declaring a concentration to be compatible with the common market and the EEA Agreement (Case No COMP/M.3333 – Sony/ BMG) 2 I. INTRODUCTION..................................................................................................... 11 II. THE PARTIES.......................................................................................................... 12 III. THE CONCENTRATION ........................................................................................ 12 IV. COMMUNITY DIMENSION .................................................................................. 12 V. RELEVANT MARKETS.......................................................................................... 13 A. RELEVANT PRODUCT MARKET .............................................................. 13 1. PHYSICAL RECORDED MUSIC ................................................... 13 2. RECORDED MUSIC IN DIGITAL FORMATS ............................. 14 a) Introduction ....................................................................... 14 b) The wholesale market for licensing of digital music ........ 15 c) The digital market is distinct from the physical market.... 15 d) The online segment versus the mobile segment................ 17 B. RELEVANT GEOGRAPHIC MARKET ....................................................... 19 1. PHYSICAL RECORDED MUSIC ................................................... 19 2. RECORDED MUSIC IN DIGITAL FORMATS ............................. 19 VI. COMPATIBILITY WITH THE COMMON MARKET AND THE EEA AGREEMENT .......................................................................................................... 21 A. COMPATIBILITY WITH THE COMMON MARKET AND THE EEA AGREEMENT – RECORDED MUSIC IN DIGITAL FORMATS............... 21 1. MARKET CHARACTERISTICS..................................................... 21 a) The digital market is an emerging and growing market.... 21 b) The digital market is dynamic........................................... 22 c) The digital market applies uniform prices vs. differentiated prices in the physical market ...................... 23 d) DRM and usage restrictions are differentiators................. 24 e) End consumers do not care about labels: online/mobile music providers need to have licences with all majors in order to be able to offer a repertoire which is as complete as possible.......................................................... 24 f) The emergence of the digital sector creates growth opportunities – including for the independents................. 24 g) Uncertain development of the market ............................... 25 h) The business models are diverse and evolving ................. 26 i) The Digital Music Retailers .............................................. 27 3 j) The retail market for digital music attracts frequent new entry................................................................................... 31 2. ABSENCE OF NON-COORDINATED EFFECTS ......................... 32 a) The recorded music industry is concentrated.................... 32 b) The merger has not led to a position of single dominance in the national markets for digital distribution of music ... 33 c) The merger has not led to competitive issues with regard to market foreclosure of digital music retailers and portable music player manufacturers ................................ 33 d) The merger has not led to competitive issues with regard to market foreclosure of independent record companies .. 34 3. CREATION OR STRENGTHENING OF A COLLECTIVE DOMINANT POSITION IN THE MARKET FOR DIGITAL DISTRIBUTION OF MUSIC ........................................................... 35 a) Introduction ....................................................................... 35 b) Conditions for findings of collective dominance .............. 35 c) Analysis of the market structure common to all affected markets .............................................................................. 36 d) Transparency ..................................................................... 40 e) Retaliation ......................................................................... 44 f) Countervailing abilities ..................................................... 46 4. IMPACT OF THE MERGER ........................................................... 48 5. COUNTRY SPECIFIC ANALYSIS................................................. 49 a) United Kingdom................................................................ 49 Introduction..................................................................................................... 49 Online price analysis....................................................................................... 50 Mobile price analysis ...................................................................................... 51 Transparency................................................................................................... 52 Retaliation, countervailing abilities and the effect of the merger................... 52 b) France................................................................................ 53 Introduction..................................................................................................... 53 Online price analysis....................................................................................... 53 Mobile price analysis ...................................................................................... 54 Transparency................................................................................................... 55 Retaliation, countervailing abilities and the effect of the merger................... 55 c) Germany............................................................................ 55 Introduction..................................................................................................... 55 Online price analysis....................................................................................... 56 4 Mobile price analysis ...................................................................................... 57 Transparency................................................................................................... 57 Retaliation, countervailing abilities and the effect of the merger................... 58 d) Italy.................................................................................... 58 Introduction..................................................................................................... 58 Online price analysis....................................................................................... 59 Mobile price analysis ...................................................................................... 60 Transparency................................................................................................... 60 Retaliation, countervailing abilities and the effect of the merger................... 61 e) Spain.................................................................................. 61 Introduction..................................................................................................... 61 Online price analysis....................................................................................... 62 Mobile price analysis ...................................................................................... 62 Transparency................................................................................................... 63 Retaliation, countervailing abilities and the effect of the merger................... 63 f) Belgium ............................................................................. 63 Introduction..................................................................................................... 63 Online price analysis....................................................................................... 64 Mobile price analysis ...................................................................................... 65 Transparency................................................................................................... 65 Retaliation, countervailing abilities and the effect of the merger................... 65 g) Netherlands........................................................................ 66 Introduction..................................................................................................... 66 Online price analysis....................................................................................... 66 Mobile price analysis ...................................................................................... 67 Transparency................................................................................................... 67 Retaliation, countervailing abilities and the effect of the merger................... 68 h) Sweden .............................................................................. 68 Introduction..................................................................................................... 68 Online price analysis......................................................................................