A music business: Universal’s gamble Summary When Universal Music Group bought a part of EMI’S Capitol Records, many asked themselves if this was a smart decision. A ‘gamble’ of $1. 9 billion. Many questioned if this merge would disadvantage smaller companies, because Universal owns, thanks to this merge, 40%-50% shares of most markets. Because of the long statement of objections by the European Commission, Eurocrats might force Universal to sell parts of EMI, such as Virgin Music and EMI Classics. Even though the eventual forced sell, Universal has to pay $1. 75 billion to EMI.
Shareholders and sister companies of Universal aren’t happy about this. Competitors of Universal, are happy to hear this, while some ask themselves why Universal wanted to participate in this merge in the first place. The industry is instable, and sales have fallen thanks to digitalization. EMI is in good shape, notwithstanding the economize of all firms in this industry. Still, the part Universal got from EMI, is the most harmful to the digitalization. Universal is in a difficult position. To investors, it says that the industry is starting to stabilize, and that investing your money, will give you profits.
While to regulators, it says that it’s getting ougher and tougher to compete against the digitalization, and that they must expand to stay in the game. Lucian Grainge, head of Universal, says: “The merge will invest in the industry’s future, and it will help building the company back up. ” After all, Universal needs to find a way to make a profit next to all subscription services. And selling songs online, isn’t as profitable as the CD’s. Some say that a larger Universal will give the company confident for applying new business models, while others think a larger Universal will make it tougher for new distributors to Join the market