Executive Vice-President Teresa Ribera
European Commission
Rue de la Loi / Wetstraat 200
1049 Brussels
Belgium

12 June 2025

Dear Executive Vice-President Ribera,

I am writing to urge DG Competition to conduct an in-depth investigation into the proposed acquisition of Downtown Music Holdings LLC (Downtown) by Universal Music Group (UMG).

I write as a competition expert ­– I have been both Chief Economist and Senior Independent Director of the UK competition authority – and also as a recording artist and co-founder of a small independent label and publisher which uses Downtown's services.

This is not the first time I have put pen to paper about developments in the music industry. I previously highlighted my concerns about Spotify's decision to "demonetise" tracks that fail to meet an arbitrary threshold.^[1] IMPALA, the European trade association for independent record labels, contacted me to see if I was concerned about the Downtown acquisition, especially in the context of UMG now claiming credit for Spotify's demonetisation policy, and the wider adoption of thresholds by streaming services, as part of its "Streaming 2.0" strategy.

I am deeply concerned that this acquisition represents another step in UMG's broader strategy of undermining the vitality and viability of the independent music sector ­– both in the EU and globally – with a view to strengthening its own position, and potentially also that of the other two majors (Warners and Sony).

It is vital that this anti-competitive process is stopped. The independent sector is essential to competition, creativity, culture and growth in the music industry. Independent labels employ different models from the majors, giving greater weight to artist autonomy and longevity, to fostering new artists and emerging genres, and to catering for culturally important but niche musical tastes. Many successful artists prefer to record for independent labels, as they retain greater control over their musical development. There are also many smaller artists who record for independent labels, who would be unlikely to be signed by major artists, but who collectively generate substantial value, for consumers, culture and the economy.

For this valuable sector to be preserved, independent record labels and publishers need continued access to an independent ecosystem of critical distribution and administration services – the interests of which are aligned with their customers in the independent sector.  This alignment is critical for ensuring that independents receive a high quality of service, efficient prices and their fair share of the revenues generated by digital music streaming.

UMG's acquisition of Downtown seriously threatens this access. Downtown is a large independent provider of critical distribution and administration services. These include two digital distribution services (FUGA and CD Baby), a publishing administration service (Songtrust), and a royalty management software service (Curve), all highly innovative and valuable businesses serving the independent sector.

While major labels such as UMG carry out such services in-house, most independent labels, publishers and artists rely on third party providers, since these services benefit from substantial economies of scale. Digital distribution services are especially critical for any independent record label, since digital revenues now account for 70–80% of all income from recorded music. Publishing administration services are also vital, with many independent record labels relying on revenues from their publishing arms to remain viable.

My first concern is that this acquisition will further strengthen UMG's already significant negotiating power with digital service providers (or DSPs), such as Spotify and Apple Music, and that UMG will use this leverage to get better terms for itself and at the same time disadvantage independent labels and music publishers. It is important to consider not just UMG's market share by revenue, but its "control share," ­ that is, the number of sound recordings whose licensing it can influence through its (and its affiliated companies') representation of individual artists and songwriters, whether by owning or distributing or otherwise negotiating the rights.

This concern is not hypothetical. UMG has already been successful in pushing through the "demonetisation" by DSPs of many smaller artists, a policy which has harmed many independent labels. It has also negotiated preferential terms with DSPs, paving the way for similar deals for the other majors – Sony and Warner – which have most favoured nation agreements (MFNs) with the main DSPs. These deals are not extended to independent players and are to their detriment.

Moreover, the ability of independent labels to receive their fair share of digital revenues is not solely related to the royalty paid per stream but also to the number of streams their repertoire receives (their share of the 'streaming pie'). I understand that the majors are already extracting ever more advantageous treatment from the DSPs in terms of critical factors such as inclusion of repertoire on key playlists, marketing support, homepage "takeovers" and advertising credits. It is far from obvious that these additional benefits would be shared with independent labels distributed by UMG. The acquisition would further enhance UMG's bargaining power with the DSPs, and thus should be expected to reduce the revenues received by most, if not all, independent labels.

My second concern is that the acquisition would remove important distribution and administration services (FUGA, Songtrust and Curve) from the independent ecosystem. Independent labels and publishers relying on one or more of these services face a difficult choice: either stay and become reliant on UMG ­– whose long-term interest is in undermining their effectiveness as competitors – or leave and incur substantial switching costs in an environment with fewer meaningful alternatives. In practice, I would expect to see independent labels becoming increasingly dependent for market access on their biggest competitor post-merger, and at serious risk of UMG reducing the quality or increasing the fees for these services over time. Again, this would reduce the net revenues received by independent labels,

My third concern is that UMG may be able to leverage the position it has gained through this merger by tying additional services, in other words by allowing access to one UMG service only if others are also used. This would make it harder for independent competitors providing such additional services to remain viable, further limiting the independent options available to those independent record labels that are seeking aligned independent distribution and administration services, and potentially – by denying economies of scale to these residual independent options – driving down their quality and forcing up their prices.

My fourth concern is that the merger would give UMG access to critical commercial data from these service platforms, which it could use to compete unfairly, for example by targeting and signing artists and songwriters that are currently signed to independent labels and publishers, or by targeting and signing up-and-coming artists and songwriters based on data that is unavailable to independent labels and songwriters. This mirrors the recent case in which DG Competition took action against Amazon for using marketplace data to benefit its own operations as a supplier. A similar risk clearly arises here and the imposition of firewalls is rarely an effective remedy.

The combined effect of the conduct outlined above is that this acquisition will lead to the revenues of independent labels being substantially squeezed, making it ever harder for them to compete for talent in the A&R market, or to support the smaller scale talent that collectively contributes so much to European consumers, culture and growth.

Finally, this acquisition must be viewed in context. In recent years, UMG has pursued a pattern of acquisitions that are steadily consolidating its control over the independent sector. This both reduces the competitive constraint UMG faces from independents and also enables it to extract an ever-greater share of all digital revenues. I note that UMG would not appear to gain any other synergies from this deal – it already carries out inhouse the services that Downtown provides, and could readily offer these to independent labels and publishers through organic growth. Instead, through the acquisition, it is seeking to acquire market share and greater control over some of the most important,  innovative and disruptive players in the music industry, thereby undermining the long-term vitality and viability of a fully independent ecosystem.

I strongly urge DG Competition to scrutinise this deal thoroughly to really understand the threat it poses for competition, choice and innovation in the music industry. I would be happy to discuss my concerns further.

Sincerely,

Professor Amelia Fletcher, CBE

Amelia.Fletcher@uea.ac.uk

University of East Anglia