Sony Music Entertainment (SME) recently received clearance for their purchase of Kobalt Music Group’s independent label and distributor AWAL. What does Sony want with an indie label, anyway? Well, it’s more complicated and competitive than you might think.
To kick things off, the music industry conglomerate received preliminary clearance for their acquisition after an investigation from the UK Competition & Markets Authority (CMA). This clearance from the CMA permits the deal between Sony and AWAL to tentatively proceed while they continue their investigation.
Sony first initiated the over $430 million buyout of the label beginning in May 2021 and battled international competition, specifically in the UK, following the initial buyout.
On February 11, the CMA determined that the deal did not “substantially reduce competition in the UK industry” and “may not be expected to do so in the future.”
According to the CMA investigation document, “AWAL has never been profitable… [and] it lacks a global footprint.” The Sony document reads, further claiming that “[under] continued ownership by Kobalt, AWAL faced an uncertain future.”
In a media statement, Sony Music explained why their recent acquisition was important to their mission to serve independent artists: “AWAL and Neighbouring Rights will become a new division within SME’s suite of independent artist and label services offerings and will be enhanced by the technology and network of SME’s independent music distribution company, The Orchard. Lonny Olinick will remain AWAL’s CEO.”
Even with Sony’s intention to keep the independent artist and label service offerings, such as promotion and distribution, independent music authorities fear what this means for the industry.
Paul Pacifico, CEO of the UK’s Association of Independent Music, shared his thoughts on the merger and what it means for the industry: “Whilst the CMA has ruled that AWAL’s acquisition is not enough to substantially reduce competition by itself, it is part of a pattern that threatens to gradually erode competition and diversity in UK music if independent entrepreneurs continue without much-needed access to capital.”
The CMA plans to provide a final decision by March 17 following feedback from stakeholders about the provisional findings. The decision will conclude Sony’s acquisition of AWAL and the buyout deal.