IMPALA to oppose Universal Music Group's sale of shares to Tencent

By Emmanuel Legrand

IMPALA, which represents European independent music companies, is mounting a legal challenge to the proposed acquisition of a 10% stake of Universal Music Group by China's Tencent Music, with an option to buy an additional 10%. IMPALA said it is also "concerned about who might buy the additional UMG stakes that are up for grabs."

  IMPALA said the combination of the world's biggest music company with Tencent, which currently owns four out of five of the leading music apps in China, with an estimated 90% market share in the growing Chinese market for the retail of digital music, will distort the market and create a situation that would be detrimental to the music sector.

  IMPALA plans to argue before the EU's competition authorities that the impact of such a sale "would change the whole music ecosystem, and smaller companies will be the first to lose out."

Risk of harm for consumers and competitors

   The organisation points out that the Chinese competition watchdog is already looking into Tencent Music’s licensing deals with the majors. This situation "underlines the importance regulators attach to ensuring fairplay, and other regulators have raised the alarm about the power of online services and media giants."

  For IMPALA’s Executive Chair Helen Smith, the Tencent/UMG deal, even at a low level of shareholding, will have an impact on both other companies of the sector and consumers. "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,” said Smith.

  Smith concluded: “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.”