As opposition to the $775 million acquisition of Downtown Music Holdings by Virgin Music Group heats up, Downtown CEO Pieter van Rijn says the controversial deal has attracted more attention because of the buyer’s owner, Universal Music Group (UMG), than it has for the benefits musicians would enjoy from the combination.
In an open letter obtained by Billboard, which arrived as the European Commission investigates the acquisition’s potential effect on competition, van Rijn took aim at what he called “misinformation” aimed at “undermin[ing] our longstanding and trusted client relationships….It’s disappointing to see how quickly some parts of our industry closed the door to rooms we — and others — helped build.” He added that the debate about the acquisition, announced on Dec. 16, and its impact on the independent music community “must be honest. It must be about facts, not agendas.”
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While van Rijn referred to the acquisition as a “merger” of Downtown and Virgin, a label services provider owned by UMG, European regulators are more concerned about the transaction’s potential to hurt competition for artist and label services. In July, European regulators began a four-month investigation into the acquisition after a standard preliminary review, owing to the fact that UMG is the largest record label/publisher by both annual revenue and market capitalization, and that Downtown owns a variety of companies that allow independent recording artists and songwriters to generate revenue in today’s digital-focused market, including distributors FUGA and CD Baby, publishing administrator Songtrust and rights management company AdRev.
Opposition quickly mounted after Virgin and Downtown announced the acquisition. The day after the revelation, the deal was opposed by independent music groups IMPALA, Association of Independent Music (AIM) and IMPF, a global trade body for independent music publishers. IMPALA executive chair Helen Smith called the transaction “another land grab” and urged European competition authorities “to set the standard internationally” by blocking the deal.
But van Rijn has painted the company’s acquisition by Virgin as an opportunity to better serve independent artists who need a range of services to compete in the modern global music business. He called Virgin “a business that aligned with our own, not only in its philosophy but also in the complementary services that we offered.” Downtown had been approached by other interested suitors, van Rijn said, but Virgin’s interest marked the first time Downtown encountered a potential partner “who wanted to invest in Downtown, our team, and our clients.”
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Without naming names, van Rijn referenced independent music groups that “chose to overlook the clear benefits for their members” that the acquisition offers. Independent artists, he continued, need partners “to open doors and unlock the potential of their music.” He added that these artists would be better off under a combined Downtown-Virgin that could offer “more resources, greater support, more innovative technology, all while not only maintaining, but actually building on, the great service levels, platforms, and the flexibility of our current offering.”
Van Rijn’s open letter followed a similar statement by Virgin co-CEOs JT Meyers and Nat Pastor in July that explained the motivation behind the acquisition (to combine the two companies’ “unique capabilities” to create “an even more robust and flexible suite of services”) and addressed concerns about independent artists and labels’ sensitive data ending up in the hands of a UMG-owned company. “Virgin already handles — with the care and confidentiality they deserve — the sensitive client data of hundreds of partners,” they wrote. “Betraying the trust our clients have bestowed on us would be self-destructive: they would quickly, and quite rightly, end the relationship.”
In his letter, Van Rijn also acknowledged artists’ concerns about data protection and security as “natural” but insisted that “Virgin, like Downtown, operates in a culture built on trust. And, therefore, our clients can expect the same, if not expanded, industry-leading data protection and security they are used to now.”
