UMG’s Downtown Deal Sparks Forceful Memos From Virgin CEOs, Hundreds of Indie Music Execs

When the Universal Music Group announced in December that its Virgin Music Group subsidiary was acquiring indie label services company Downtown Music in a $775 million transaction, it ended months of speculation about the future of Downtown — which is comprised of FUGA, CD Baby, Songtrust and more — as its longtime financial backer looked for an exit.

What it started, however, is an increasingly heated back and forth among industry stakeholders about whether the world’s largest music company should be allowed to acquire one of the few remaining standalone services powering distribution for independent companies.

The backlash started right away, with indie music trade organizations like IMPALA, AIM, IMPF and Beggars Group releasing statements the following day referring to the deal as a “land grab”; days later, WIN, A2IM, Secretly Group and others released a joint statement urging regulators to block the deal. Last month, Universal formally notified the European Union of its intention to move forward with the deal, which triggered a standard antitrust review by the European Commission, the entity that has until July 22 to decide to wave the deal through or investigate further, leading to further volleys from the indie community against the proposed deal, which would bring another big indie distro company under UMG’s purview following its acquisition of [PIAS] last fall.

Late last week, Virgin’s co-CEOs Nat Pastor and JT Meyers sent out a memo to staff, obtained by Billboard, pushing back on many of the claims from the indie community, which largely center on anticompetitive grounds and concerns that UMG would gain access to data from the indies that use FUGA as their pipeline to the broader marketplace. 

“The deal with Downtown will strengthen the foundation we’ve built thus far,” Pastor and Meyers wrote. “Our motivation for the merger and our excitement about it are rooted in this singular opportunity: by combining Downtown’s and Virgin’s unique capabilities, the unified company will offer an even more robust and flexible suite of services to independent labels everywhere.” On the data issue, they added, “Virgin will not only uphold Downtown’s data privacy policies, we will also expand and strengthen them. Virgin already handles — with the care and confidentiality they deserve — the sensitive client data of hundreds of partners. Betraying the trust our clients have bestowed on us would be self-destructive: they would quickly, and quite rightly, end the relationship. Which is why we’re proud to say that since the day we entered this business, we have never had a single complaint of misuse of client information of any kind.”

And in terms of the issues raised by many in the indie music community around major-owned consolidation — not just with UMG, but with Sony buying AWAL in 2022 and Warner very publicly in an acquisitive phase as it looks to bolster its own offerings — they pointed to the increase in private equity and entrepreneurial investment in distribution in the past half-decade.

“The more investment that flows into the services businesses, the more independent labels benefit, because more investment means better resources and greater competition among services providers,” the two wrote. “Today, approximately 100 services companies are competing to partner with independent labels and artists. The stronger the provider of services, the greater the chance that the independent label and artist has to succeed in today’s market.”

Now, the indie community is hitting back once again in a new open letter, signed by more than 200 indie music executives, headlined “We must keep music open” that pushes for the European Commission to decide by that July 22 deadline to continue its investigation of the deal by entering a “Phase II” review, writing, “This isn’t just a simple ‘investment’ in one of the world’s most prominent independent companies; it is about control.”

“The implications are profound,” the signatories write, in a letter sent to EC executive vp Teresa Ribera, which raises many of the same points that the individual companies have brought up in past statements. “A concentration of this magnitude would narrow the range of voices, styles and cultures that reach the public,” it continues. “It would give UMG further power to shape digital services, influence monetization thresholds and extract more, at the expense of the independent sector. That would reduce choice for consumers, stifle experimentation, and undermine Europe’s role as a vibrant incubator of musical and artistic expression. Fans will hear less of the new and more of the same. Artists working outside the commercial mainstream will struggle to find traction. And a once-thriving creative economy will begin to stagnate.”

The letter is signed by business owners, association leaders and top execs from companies such as A2IM, 4AD, AIM, Beggars, Better Noise, Chrysalis, Cooking Vinyl, Dead Oceans, Domino, Epitaph, Exceleration Music, Hopeless, Jagjaguwar, Matador, Merge, Rough Trade, Secretly, Sub Pop, The Numero Group, Warp, XL, Young and more. 

“Independent music companies play a vital role in promoting music innovation, fostering diversity and protecting culture,” they wrote. “To fulfill that role, we must have fair and non-discriminatory access to the best  infrastructure in the music economy. And not be forced into structural dependence on our biggest competitor who is also shifting payment models on digital services.”