The UK’s CMA has cleared Sony’s acquisition of AWAL, an ‘artist and label’ services provider, following an in-depth merger inquiry.
The Competition and Markets Authority (CMA) referred the merger to an in-depth Phase 2 inquiry in September 2021, after identifying competition concerns during its initial Phase 1 investigation.
In February 2022 the CMA provisionally concluded that the deal does not substantially reduce competition in the UK and may not be expected to do so in the future. Following a consultation that ended on 4 March 2022, the CMA has upheld its provisional findings and cleared the deal.
Sony is one of the three major record labels active in the UK today, along with Warner and Universal Music Group. In addition to its main label offering, Sony Music Entertainment, Sony also owns The Orchard, an A&L services provider. A&L services typically cover promotion, marketing and distribution. They also allow artists to retain full ownership of their copyrights and a greater percentage of royalties. A&L contracts tend to provide a narrower set of services with less financial support and shorter-term contracts than traditional record contracts.
AWAL is an emerging music distributor offering an alternative to traditional music deals by providing both A&L services and a ‘DIY platform’ that allows artists to upload their own music for distribution.
The CMA’s inquiry focused on the 2 main areas in which the firms’ businesses overlap. It assessed the extent to which The Orchard and AWAL may be expected to compete to provide A&L services. It also looked at how closely Sony and AWAL may be expected to compete to sign successful artists, and those with the potential to become successful, where higher levels of support and investment are provided.
The CMA found that, while not currently competing closely due to their different areas of focus, The Orchard may have become a stronger rival to AWAL in the supply of artist services in future. However, there are many other providers who will continue to compete effectively with both firms – including independent A&L companies, the A&L branches of the other major labels (like Warner’s ADA and Universal Music Group’s Virgin) and independent labels.
