CMA provisionally clears Sony Music’s acquisition of AWAL


UK competition watchdog the CMA has published its provisional decision on Sony Music’s acquisition of distributor and artist services company AWAL.

Its verdict? It has provisionally cleared the deal, after concluding that bringing AWAL and rival The Orchard under one corporate roof will not hurt the industry, artists and/or music fans.

“The CMA has provisionally found that, while not currently competing closely due to their different areas of focus, The Orchard may have become a stronger rival to AWAL in the supply of artist services in future,” explained the body.

“However, there are many other providers who will continue to compete effectively with both firms – including independent A&L companies, the A&L branches of the other major labels (like Warner’s ADA and Universal Music Group’s Virgin) and independent labels.”

Sony Music announced its $430m acquisition of AWAL in February 2021, with plans to have it sit alongside The Orchard within the major label. As the deal was completed in May 2021, the CMA launched an investigation of the acquisition on competition grounds.

In September 2021, that ‘phase one’ investigation ended with an announcement that the CMA was concerned that the 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”.

The CMA gave Sony Music five days to respond to its concerns, but with the label describing the decision at the time as “perplexing and based on an incorrect understanding of AWAL’s position in the UK”, a ‘phase two’ investigation duly began later that month.

You can read Sony Music’s response to the CMA’s ‘Issues Statement’ here, setting out the major label’s belief why the acquisition is “pro-competitive”.

It included the memorably-blunt argument that “AWAL is not a significant player, is not profitable, and does not have unique capabilities… after more than 20 years of operations, AWAL was poised to become less relevant, rather than to disrupt the distribution of digital music or become a close competitor of SME / The Orchard.”

At the time, European indies body Impala filed its own response to the CMA, arguing against the acquisition’s approval, arguing that “whilst Sony’s market share gain may seem small in recorded music, it constitutes a significant loss in the independent music sector’s scale and ability to negotiate digital licensing deals through Merlin”.

The CMA has come down in agreement with Sony Music’s view, as its announcement this afternoon made clear.

“In terms of its rivalry with Sony, AWAL is still a relatively small player when it comes to signing artists who require higher levels of support and investment. Despite trying to expand its offering, AWAL was expected to continue to compete with Sony only on a limited basis,” it explained.

“In the course of its investigation, the CMA also found that many other firms have begun providing similar services which can be expected to make up for the limited loss of competition from AWAL.”

Today’s decision is provisional, which means that companies and industry bodies can submit their views on the findings by 4 March, at which point the CMA will prepare its final decision – which is expected by 17 March.

Sony Music hailed today’s news. “Sony Music Entertainment welcomes the CMA’s provisional determination that its acquisition of AWAL raises no competition concerns and, in doing so, its recognition of the competitive and dynamic nature of the UK music market,” said its statement.

“Our investment in AWAL will deliver real benefits for artists and consumers, amidst intense competition at every level of the music industry. We look forward to continuing to work with the CMA throughout the final stages of their review.”

Whatever the final outcome, the CMA is already involved in another process that affects the music industry. Not an investigation – a very specific term in regulation-land – but a ‘market study’ of music streaming and wider industry structures.

The body published its ‘statement of scope’ for this market study in January this year, revealing a wide-ranging focus on the business practices of rightsholders and streaming services alike.

With that in mind, one section of the CMA’s provisional decision on the Sony Music / AWAL deal is interesting:

“Over recent years, SME has improved the terms it has offered to its artists in terms of improved average royalty rates and offering more deals where SME does not keep the rights to recorded music in perpetuity.”

You can expect this issue to come up prominently during the CMA’s market study: the argument that deal terms are improving already may be marshalled by labels in support of their belief that the market is operating healthily. And, of course, their critics will be arguing that this is not the case.

Written by: Stuart Dredge