UMG’s $775 Million Deal for Downtown Faces Scrutiny From European Commission

The European Commission said on Friday it will investigate Universal Music Group’s planned acquisition of Downtown Music Holdings, according to a statement.

The investigation will determine whether “the transaction threatens to significantly affect competition in certain markets of the music value chain, where both companies are active, in Austria and in the Netherlands,” which requested the probe, according to an announcement by the EC. UMG is legally registered in the Netherlands and its stock trades on the Euronext Amsterdam.

A UMG spokesperson said a statement that the company looks “forward to continuing to co-operate with the European Commission in the weeks ahead. We are confident that we will close this acquisition in the second half of the year, on its original timeline.”

UMG, the world’s largest music company, announced plans late last year to acquire Downtown for $775 million. The deal would significantly expand UMG’s presence in the market catering to do-it-yourself artists, songwriters and indie labels.

New York-based Downtown is the owner of the direct-to-creator distributor CD Baby, and the direct-to-business technology and distribution platform FUGA, the administration business SongTrust, and royalty and financial services companies, including Curve.

The fast-growing sector of the music business serving artists and companies that want to maintain greater control of their works has seen a flurry of investment and acquisitions in recent years.

In addition to its bid for Downtown, UMG acquired a controlling stake in the indie label group [PIAS], an expansion of its 2022 investment in the London-based business.

IMPALA, the European association of independent music companies, which has been critical of UMG’s prior acquisitions, said it welcomed the EC’s investigation and hopes regulators will stop “UMG’s juggernaut strategy.”

“The acquisition would further entrench UMG’s position across European music markets, squeezing out competition, narrowing opportunities for independents and the artists they work with and allowing UMG to exercise more control over streaming services,” IMPALA said in a statement.

In a research note published this week, analysts at J.P. Morgan agreed the deal would increase UMG and Virgin Music’s reach, and said it would enhance UMG’s “support of independent music entrepreneurs … [and] double Downtown’s [earnings before interest, taxes, depreciation, and amortization] over 2-3 years.”

UMG’s deal must receive regulatory approval to proceed, and the European Commission said it has asked UMG to officially report the deal.