Why The EMI Acquisition Will Be Bad For Universal

The Universal Music acquisition of EMI is finally complete and the weeping and gnashing of teeth has begun. For the last 6 months the employees of both companies have been walking on egg shells, not knowing if the ax would fall on them if and when the merger occurred. The ax finally dropped last week when 50 people were let go from Universal distribution and another 10 from Nashville, although most of those were EMI employees. Others were told up front that their positions would be eliminated within 120 days.

Universal purchased EMI more to gain market share than anything, but this already looks like it's backfiring. Here's why:

1. In order for the purchase to go through, Universal had to shed labels and publishing units in Europe. That meant that the market share boost wouldn't be as much as they originally thought, nor would the value of EMI be as high as a result.

2. Universal already had the largest market share already with over 30%. What reason was there to increase it other than ego or some obscure executive bonus? Sure Sony Music is strong, but more of that may be due to #3 below.

3. The EMI acquisition has taken up so much time and attention that the execs at Universal have taken their eye off the ball of selling music. This will continue to be a problem for another year at least.

If I was an artist on Universal or EMI right now I'd be worried. You don't know if any of your champions in A&R, sales, marketing will be let go, you don't have their full attention as they angle for new jobs as a fall-back, and the suits in the boardroom continue to play corporate structure games instead of their core business.

This is a perfect example of what happens when big business gets involved in what should be art.

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