Senator chides music exec for evading questions

The chief executives of Universal Music Group and EMI defended their planned merger during a hearing of the Senate Judiciary Committee’s subcommittee on Antitrust, Competition Policy and Consumer Rights on Thursday.

Senators pressed Lucian Grainge, the CEO of Universal, to address concerns that the deal will stifle competition in the music industry and concentrate power in the hands of a single "super major" label.

Grainge repeatedly argued that his company has an incentive to sell its music to as broad an audience as possible.

Subcommittee Chairman Herb Kohl (D-Wis.) said he had heard Grainge is a smart and tough executive.

"You don't seem to answer questions," Kohl said, "which is part of your smartness and your toughness."

Universal Music, a division of French conglomerate Vivendi, announced its intent to buy EMI last November. The $1.9 billion deal would reduce the number of major worldwide labels from four to three and give Universal Music control over the catalogs of artists such as the Beatles, the Beach Boys, Coldplay and Katy Perry.

Kohl expressed concern that the combined label, which would control about 40 percent of the music business, would become a "gatekeeper" capable of killing off new online services.

Gigi Sohn, president of advocacy group Public Knowledge, noted that a combined Universal-EMI would have accounted for 51 of the Billboard Hot 100 songs in 2011, and said consumers would ignore any new online service that didn't offer that host of popular artists.

This market control would give the combined company the power to destroy new services, Sohn testified.

She compared the deal to AT&T's bid to buy T-Mobile, which regulators blocked last year, saying that in both cases, the deals would reduce the number of major firms from four to three and eliminate a "maverick" competitor. 

Sen. Mike Lee (R-Utah), the subcommittee's ranking member, noted that the merger would result in a "significant degree of consolidation," but said antitrust regulators must look carefully at market power, and not just the raw portion of sales the new company will control.

Grainge and Roger Faxon, the CEO of EMI, argued that technological changes in the music industry have sapped record labels of control over the market.

Grainge said the Internet allows new bands to bypass the label system entirely and distribute their music directly to their fans online.

Faxon argued that if consumers cannot get the music they want when they want, they often choose to pirate it.

"The power today rests with consumers, not record labels," Irving Azoff, the CEO of Live Nation Entertainment, said in testimony in support of the deal.

Grainge promised that Universal is committed to investing in EMI, which has suffered financially in recent years.

He said the company has a duty to its artists to try to distribute their work as broadly as possible and that it would be "commercial suicide" to ignore new online services.

The Federal Trade Commission is currently reviewing the deal.

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