For the third consecutive morning: a reading breakfast. Headlines in today’s FT: the Sony BMG merger…
Sony BMG ruling rocks music industry
By Andrew Edgecliffe-Johnson in London and Tobias Buck in Brussels
Published: July 13 2006 09:34 | Last updated: July 13 2006 22:59
The global music industry was thrown into turmoil on Thursday after a European court unexpectedly annulled the decision that led to the creation of Sony BMG two years ago, adding uncertainty to the European merger review process.
Europe’s second highest court backed a challenge by independent music companies, which claimed regulators had been wrong to allow Sony and Bertelsmann to merge their recorded music businesses in 2004. In addition to the problems caused for the music industry, the decision adds uncertainty to the scrutiny of European mergers.
An effect of the ruling is to throw into doubt the proposed merger of Warners & EMI (each is trying to buy the other). My professional history includes relationships with both.
Also close to (professional) home: the publisher of the early Crim catalogue was/is BMG. Two years ago, prior to the merger with Sony, I was having considerable difficulties with BMG regarding major underpayment of royalties. Dealings with BMG London were not moving easily & speedily to a satisfactory conclusion (such as would have been achieved by immediate payment of the huge non-payment). One of the difficulties for BMG was accepting the size of their non-payment. Perhaps part of the difficulty for the Main Player, with whom we were dealing, was in believing & accepting how much incompetence & ineptitude was necessary for BMG to underpay to the extent involved.
Yesterday’s diary refers to the copyright assignments from myself (along with the other early Crims) to EG…
On February 22nd. 1976 Mr. Alder, then my business manager, advised me to sign over my copyrights to EG that they might:
protect my interests;
collect my royalties;
defend the copyrights around the world.
Regrettably this information was unsound, untrue, contrary to my personal interest, and significantly in the personal interest of Mr. Alder, the accountant & adviser giving me advice (a license was sufficient for all of these)...
In 1991, during the collapse of EG & the accompanying sale of the partners’ (Messrs. Alder & Fenwick) assets, I was dealing personally & directly with Mr. Main Player at BMG. Mr. MP was the man responsible within BMG for acquiring the EG publishing catalogue; which included the assignments made over by me to EG on February 22nd. 1976 in accordance with the unfortunate (for me) advice given by Mr. Alder, chartered accountant. The price paid for the EG catalogue by BMG was c. £2 million.
A process of due diligence (an investigation into assets being acquired, to establish their legitimacy) was undertaken for BMG in 1991, and raised the question: is payment of royalties a sufficient consideration for assignment of copyrights? (I know this, because the report eventually reached my hands). The answer to this question is, emphatically no. The writer/s of a piece of music has two separate forms of direct financial interest: the royalty stream & the value attached to copyright ownership. Merely to pay arising royalties (which is itself another story, given EG’s problems with paying royalties) addresses only one aspect of the writer’s interest. BMG knew this in 1991, as they know it now. So, why did Mr. MP & BMG continue with the EG acquisition, knowing the query that diligence had raised?
In my view, it is unlikely that Mr. MP, BMG or any other Big Cheese within the industry, is/are likely to give a simple & honest answer to this. Were they to do so, I believe it would be something along the lines of…
We are a huge international corporation. The writer is a little person. We have the resources & time that will crush the finances & spirit of any little person that gets in our way. So we will do what we want - because we can.
To be fair, this unsympathetic possible rendition of a possible answer deserves some amelioration. Accordingly, an addendum…
We will do what we want subject to accommodating a pesky artist, a leading & respected industry solicitor acting for them, knowing they have access to press, and in any case we know they really were fucked over by management.
Part of the contract between EG & BMG allowed for deductions to be made, should any problems arise in the deal; this, in the acknowledgement by EG that there were some “grey areas”. Perhaps I was categorised as a “problem” and my catalogue a “grey area”? BMG deducted £50,000 from the payment to EG in respect of my catalogue, an arrangement Messrs. Alder & Fenwick were “persuaded” to accept by Mr. MP.
Dealing with Mr. MP some 12 years later on the same catalogue, with settlement contracts that came into effect during September 1997, greater frankness was available; along the lines of you know we were fucked over then, let’s deal with the situation now. The likely response in 1991 was to argue legal points; the likely response two years ago, silence before moving to deal with current practicalities.
Drawing a few of these threads together, less the innocent reader is becoming confused, despondent & losing faith that the music industry has other aims than to help & support music entering our world… The takeover of BMG by Sony brought in a level of management & supervision that (to my eyes) was absent in pre-acquisition BMG. Pre-merger BMG, in the US, seemed to operate independently of the UK (and BMG was primarily a European company). A favourable outcome was the (eventual & late) payment of unpaid royalties, in my view, partly expedited by Sony’s takeover. And perhaps also partly expedited by my threatened legal action against BMG.
I am pacific, but not a pacifist. I believe some situations arise, in our fallen world, where going to war (or recognisable willingness to do so) is necessary. Warfare takes different forms, and is not always violent. Nor do I make a threat unless conflict is close: a threat is already an act of war. So, on those occasions where the common practice of the music industry goes beyond outrageous and becomes unacceptable; significantly impinges upon the direct interests of myself & those close to me; and arguments of fairness, decency, straightforwardness, transparency & equity, presented in a spirit of goodwill, no longer have purchase in the face of hubris, greed & stupidity, I look to other remedies.
I am also prepared to accept that Mr. Alder genuinely believed that he had the right to sell my copyrights; although he was prepared to acknowledge (some years later, and after the settlement removed any potential liabilities in that respect) that there were “some difficulties paying the royalties”. I know this, because this is what he told my business partner in DGM, David Singleton. That is a longer story, one that deserves to be told, but not this morning.
13.57 A morning walking around Nottingham with the Minx. Now, off to Bredonborough.
22.05 The inbox has yielded several pieces of information, from various correspondents, which touch upon a variety of dishonesties that impinge, and/or have impinged, upon my professional life.
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