IMPALA OPPOSES TENCENT/UMG DEAL

European independent trade body IMPALA is gearing up to oppose Tencent’s buyout of a 10% stake in Universal Music Group, warning that the transaction will result in “independents being squeezed further and artists also losing out.”

Vivendi has started negotiations with Tencent for a 10% investment in UMG, with a one-year call option to purchase another 10% at the same price and terms. IMPALA believes the sale “would change the whole music ecosystem, and smaller companies will be the first to lose out.”

The org points out that as UMG is the world's biggest music company—and Tencent currently owns four out of five of the leading music apps with an estimated 90% market share in the growing Chinese market—the "creeping influence" of newly combined major companies "will not escape regulatory scrutiny.” Indeed — Tencent is already facing a possible regulatory inquiry from Beijing where it's being scrutinized for the practices of its music-streaming division, according to multiple reports.

“Even at a low level of shareholding, we believe the risk of harm for consumers and competitors from such a transaction would be a concern because of the impact in both the digital market and the music sector, with independents being squeezed further and artists also losing out,” IMPALA’s Executive Chair Helen Smith said. “We also need to see how the plan to sell the rest of the UMG shares available plays out. There could be any number of outcomes.

“We would expect regulators to also be concerned about the Spotify-Tencent link. We believe it would be difficult for Tencent and other companies with power in a vertical market to acquire influence over the world’s biggest set of repertoire.”