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EU Green-Lights Merger Of Music Publishers

EU regulators gave Universal Music Group clearance Tuesday to buy BMG Music Publishing for about $2.09 billion — but warned that its "serious doubts" about the deal's effect on online music were soothed only by the companies' plan to sell the rights to some recent pop hits.

The deal would combine the No. 3 and No. 4 music publishing catalogs, giving them a 22 percent market share and scraping ahead of current market leader EMI Group PLC.

The European Commission said it had identified antitrust problems in the way the acquisition was originally structured because publishers are increasingly pulling online rights away from traditional collecting societies — who pick up royalties and distribute them to copyright holders — and transferring them to newer European-wide collecting groups.

This means the balance of pricing power has shifted in the industry, the EU said.

"The Commission's concern was that in this new environment, Universal would after the merger be able to exert control over a large percentage of titles either via its (fully or partly owned) copyrights, based on the songwriters' works or via its rights based on the individual recordings," it said.

"In a number of countries, Universal would even control more than half of the chart hits and thereby become a 'must-have' product for all online and mobile music services, whose possibilities to circumvent Universal would be significantly reduced," it said.

Vivendi SA's Universal had removed these antitrust concerns by promising to sell off several important song catalogs — mostly recent British and American pop hits including The Kaiser Chiefs, Justin Timberlake and R. Kelly.

These catalogues include European rights owned by Zomba UK, 19 Music, 19 Songs, BBC Music Publishing, Rondor UK as well as the European licenses for Zomba US.

The selloffs go beyond what the Commission wanted because it was more viable to sell complete copyrights — including performance and print rights.

Zomba owns songs written by Max Martin's Swedish hits factory for Britney Spears and the Backstreet Boys that dominated the '90s charts, while 19 has the rights to hits by the Spice Girls and other music acts propelled to success by manager Simon Fuller.

BMG — owned by German media company Bertelsmann AG — has the rights to more than a million songs by recording artists such as Nelly, Maroon 5 and Coldplay, as well as classic hits by the Beach Boys, Barry Manilow and other entertainers.

Universal Music Group is the world's largest music company. Its publishing arm controls the rights to songs by artists such as 50 Cent, Mary J. Blige and Chamillionaire.

The deal, involving BMG's publishing catalog, is separate from another merger more than two years ago between the music units of Sony Corp. and Bertelsmann that the EU is now re-examining.