EN This text is made available for information purposes only. A summary of this decision is published in all EU languages in the Official Journal of the European Union. Case No COMP/M.6458 - Universal Music Group/ EMI Music Only the English text is authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 8 (2) Date: 21/09/2012 EN EN Brussels, 21/09/2012 C(2012) 6459 final PUBLIC VERSION COMMISSION DECISION of 21/09/2012 addressed to: Universal Music Holdings Limited declaring a concentration to be compatible with the internal market and the EEA agreement (Case No COMP/M.6458 - Universal Music Group / EMI Music) (Only the English text is authentic) EN 1 EN TABLE OF CONTENTS 1. THE NOTIFICATION ................................................................................................. 6 2. THE PARTIES ............................................................................................................. 7 3. THE PROPOSED CONCENTRATION...................................................................... 7 4. UNION DIMENSION ................................................................................................. 8 5. PROCEDURE .............................................................................................................. 8 6. MARKET DEFINITION ............................................................................................. 9 6.1. Introduction to the recorded music industry ................................................................ 9 6.1.1. Background .................................................................................................................. 9 6.1.2. The recorded music sector ......................................................................................... 12 6.1.2.1. Major record companies and independent record companies .................................... 12 6.1.2.2. The recorded music value chain ................................................................................. 13 6.1.3. Other activities related to recorded music .................................................................. 25 6.1.3.1. Ancillary services ....................................................................................................... 26 6.1.3.2. Music publishing ........................................................................................................ 27 6.2. Relevant product markets ........................................................................................... 29 6.2.1. A&R ........................................................................................................................... 29 6.2.1.1. The Notifying Party's view ........................................................................................ 29 6.2.1.2. The Commission's assessment ................................................................................... 29 6.2.2. Wholesale of recorded music ..................................................................................... 30 6.2.2.1. The Notifying Party's view ........................................................................................ 30 6.2.2.2. The Commission's assessment ................................................................................... 33 6.2.3. Retailing of recorded music ....................................................................................... 44 6.2.3.1. The Notifying Party's view ........................................................................................ 44 6.2.3.2. The Commission's assessment ................................................................................... 45 6.2.4. Music-related activities outside the recorded music sector ........................................ 45 6.2.4.1. The Notifying Party's view ........................................................................................ 45 6.2.4.2. The Commission's assessment ................................................................................... 46 6.2.5. Piracy.......................................................................................................................... 48 6.2.5.1. The Notifying Party's view ........................................................................................ 48 6.2.5.2. The Commission's assessment ................................................................................... 51 EN 2 EN 6.3. RELEVANT GEOGRAPHIC MARKETS ................................................................ 55 6.3.1. A&R ........................................................................................................................... 55 6.3.1.1. The Notifying Party's view ........................................................................................ 55 6.3.1.2. The Commission's assessment ................................................................................... 55 6.3.2. Wholesale of recorded music ..................................................................................... 55 6.3.2.1. The Notifying Party's view ........................................................................................ 55 6.3.2.2. The Commission's assessment ................................................................................... 56 6.3.3. Retail of recorded music ............................................................................................ 58 6.3.3.1. The Notifying Party's view ........................................................................................ 58 6.3.3.2. The Commission's assessment ................................................................................... 58 6.3.4. Music-related activities outside the recorded music sector ........................................ 58 6.3.4.1. Ancillary services ....................................................................................................... 58 6.3.4.2. Music publishing ........................................................................................................ 58 7. THE COMPETITIVE ASSESSMENT IN THE RELEVANT MARKETS.............. 59 7.1. HORIZONTAL NON-COORDINATED EFFECTS ................................................ 59 7.1.1. Analytical framework ................................................................................................. 59 7.1.2. Market shares ............................................................................................................. 59 7.1.2.1. IFPI data ..................................................................................................................... 60 7.1.2.2. GfK data ..................................................................................................................... 61 7.1.2.3. OCC data .................................................................................................................... 62 7.1.2.4. Platform data .............................................................................................................. 62 7.1.2.5. Chart and radio airplay data ....................................................................................... 62 7.1.2.6. Market shares according to the different data sources ............................................... 63 7.1.2.7. The Notifying Party's view ........................................................................................ 78 7.1.2.8. The Commission's assessment ................................................................................... 83 7.1.3. EMI's competitive position ...................................................................................... 105 7.1.3.1. The Notifying Party's view ...................................................................................... 105 7.1.3.2. The Commission's assessment ................................................................................. 108 7.1.4. Customers' limited possibilities of switching supplier ............................................. 118 7.1.5. Likely effects of the proposed concentration ........................................................... 119 7.1.5.1. The Notifying Party's view ...................................................................................... 124 EN 3 EN 7.1.5.2. The Commission's assessment ................................................................................. 124 7.1.5.3. Comparison of Universal and EMI's agreements with online platforms ................. 125 7.1.5.4. Formal economic analysis of commercial conditions for digital customers ............ 134 7.1.5.5. Results of the market investigation .......................................................................... 137 7.1.5.6. Evidence from the merging parties .......................................................................... 138 7.1.5.7. EEA-wide market for the wholesale of digital recorded music ............................... 139 7.1.5.8. National markets for the wholesale of digital recorded music ................................. 140 7.1.5.9. Control share analysis .............................................................................................. 141 7.1.5.10. Overall conclusion on commercial conditions for digital customers ....................... 156 7.1.5.11. Likely impact on consumers .................................................................................... 156 7.1.5.12. Commercial conditions for physical customers and foreclosure of competitors ..... 168 7.1.6. Piracy.......................................................................................................................