Virgin Music execs push back at critics over Downtown acquisition
Image credits: PR Newswire
Following growing scrutiny from indie bodies and regulators, Virgin Music Group’s co-CEOs hit back on what they call “fictions and falsehoods” about their controversial Downtown deal.
A response to the Downtown backlash
The fallout from Universal Music Group’s planned $775 million acquisition of Downtown Music continues to ramble on. Downtown would fall under the scope of UMG’s Virgin Music Group, and now its co-CEOs Nat Pastor and JT Myers are fighting back.
Coming from an internal memo that quickly made its way to the public domain, according to Music Ally, the duo countered against what they called “fictions and falsehoods” being circulated about the deal.
What’s the criticism?
The deal has been under fire from many in the industry, none more noticeable than indie industry body IMPALA, which has raised concerns about what it sees as a growing threat to competition for indies in the music industry.
IMPALA first spoke out back in February, warning that the acquisition could give UMG an unfair level of dominance in the industry- something that “would not be tolerated in any other market.”
A formal investigation by the European Commission is now underway.
Virgin’s response
So, what did the memo pushback against? The letter directly addressed three main areas of criticism:
Indie fears
One of the biggest criticisms centers around the unfair advantage it could give UMG. IMPALA argues that VMG could feed client data to UMG who could use it to gain a competitive edge. Additionally, they could shut down other major assets included in the deal such as FUGA (a major B2B music distributor) and CD Baby (a digital distribution service), which IMPALA would reduce the competitive options available for indies.
Virgin’s response? That simply wouldn’t make any sense. The co-CEOs stated they would not “exploit Downtown’s customer data to gain a competitive edge for UMG” because doing so would damage the trust they’ve built with clients- only hurting themselves in the long run.
They also clarified that Downtown would continue to operate under Virgin Music Group, so the acquisition wouldn’t eliminate options for indie artists or labels.
Marker share myths
Another area of concern is UMG’s increasing market dominance. Impala’s Helen Smith evidenced data that UMG’s market share in Europe has grown 18% since 2012, in a recent Music Ally article.
Pastor and Myers dismissed this outright. In reality, UMG’s share hasn’t grown materially, while the independent sector has.
Personal criticism
Beyond business concerns, there’s also been personal criticism levelled at their employees. Critics have accused Virgin Music of being “wolves behind the cape”- ultimately helping the major label despite being indie in name.
The co-heads called the comments “insulting” and “offensive”. In truth, this criticism may seem strong given that many of those working within the independent branches of a major label are ultimately still trying to ensure the independent sector thrives. Instead, they are simply “falsehoods being spread by those who are willing [to] say anything to hurt the chances of this deal happening.”
What’s next?
While the pushback of criticism provides an insight into VMG’s thinking, the deal is still under regulatory review for now. The big question is whether regulators will ultimately buy Virgin’s argument, or side with critics who say the indie space is at risk.
Either way, it could have drastic effects on the indie music industry for years to come.