Sony’s purchase of AWAL raises competition concerns

The CMA has found that Sony’s completed purchase of AWAL raises competition concerns, following a Phase 1 investigation.

The music industry is evolving, with the development of social media and streaming enabling artists to have more control over the distribution of their own content and promotion of their brand. As a result, while most music artists have historically been signed to one of a small number of ‘major’ labels, alternative business models have emerged. In particular, independent providers of Artist and Label (A&L) services offer a streamlined version of the support typically provided by the major labels, while allowing artists to retain ownership of their music and a greater percentage of royalties.

Colin Raftery, Senior Director at the Competition and Markets Authority (CMA), said, “The music industry forms an important part of the UK’s flourishing entertainment sector, and it’s essential that distributors continue to compete to find new and creative ways of working with artists.

“We’re concerned that this deal could reduce competition in the industry, potentially worsening the deals on the table for many music artists in the UK, and leading to less innovation across the industry,” he added on September 7.

Sony is one of the three major record labels active in the UK. In addition to its main label offering, Sony Music Entertainment, Sony also owns The Orchard, an A&L services provider that it acquired in 2012. AWAL is an emerging music distributor offering an alternative to traditional music deals, providing both A&L services and a ‘DIY platform’ that allows artists to upload their own music for distribution.

The Competition and Markets Authority’s (CMA) investigation found that the wholesale distribution of recorded music in the UK is highly concentrated at present, with the three major labels accounting for the vast majority of the market. AWAL is an important emerging player, widely recognised for its innovative business model. It is one of the few suppliers outside the major labels that has succeeded in gaining a meaningful foothold in the market and has grown significantly in recent years.

Sony must now address the CMA’s concerns within five working days. If it is unable to do so, the deal will be referred for an in-depth Phase 2 investigation.

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