Last September, the European Commission and the U.S. Federal Trade Commission approved Universal Music Group’s buyout of EMI. Since then, the two record companies have been merging their operations worldwide. In Japan, the combined Universal-EMI entity will have a market share of between 15 percent and 20 percent.
Is this a good thing? Or has the merger created an unwieldy dinosaur ill-equipped to deal with an industry that needs a new business model in order to survive?
The merger is presumably good news for stockholders hoping to maximize the return on their investment in the two companies. But it could well be bad news for artists and managers, as well as employees who may be given the pink slip as the new entity restructures the companies’ operations.
Not surprisingly, Kazuhiko Koike, who since the beginning of April has been CEO of both Universal Music Japan (UMJ) and EMI Music Japan, thinks it’s all good.
“EMI Music Japan gives the impression of having more serious people and specializing in orthodox music,” he notes. “Since EMI Music Japan has genres that were not well represented at UMJ, I think our balance is even better now.”
The differences between EMI and Universal go beyond music.
“EMI was famous for having a centralized, London-based corporate culture,” says one industry source. “Universal is more localized.”
Koike agrees the two companies have different DNA. “However, we believe cultural diversity driven by people who have music in their blood will be one of our greatest strengths,” he says.
Fair enough. But not everyone agrees with Koike’s rosy outlook for UMJ-EMI (which will retain separate offices and label structures).
“Both Universal and EMI were big enough to begin with,” says one artist-management company source, who asked to remain anonymous. “Now, with the two put together, the company is bigger than a dinosaur. A lot of (domestic) artists will fall through the cracks.”
He says the merger, which gives the combined UMJ-EMI entity the lion’s share of Japan’s international-music market, is also bad news for foreign repertoire.
“Both Universal and EMI have too many products, and their international A&R (staff) have already been shorthanded,” the source says. “There is no way that all of the great artists will get the attention they need and deserve. I feel sorry for those artists who are signed to the combined Universal-EMI labels worldwide and will only get token releases — or no release at all in some cases — in the world’s biggest market for recorded music (i.e., Japan).”
UMJ’s relative autonomy is one reason former boss Keiichi Ishizaka (who began his career at Toshiba-EMI and who is now CEO/chairman of Warner Music Japan) was able to build UMJ into one of the country’s top labels.
Ishizaka says the Universal-EMI merger is good news for international acts trying to crack Japan.
“The Japanese music market has been struggling (to promote) international pop music for a decade,” Ishizaka says, adding he now sees the American music scene moving away from R&B and rap, and back to pop.
“EMI and Universal have a long history supporting and providing fantastic American pop music, and I believe this Universal-EMI merger is a good thing that will escalate this recent movement even more,” Ishizaka says.
“Bigger is not always better,” cautions one Japanese industry insider. “Will the merger make the market less competitive? For domestic, no. For international, they are already the 800-pound gorilla anyway, but having a lot of repertoire doesn’t necessarily mean that you have enough resources to effectively promote and market all of that repertoire.”
Jonny Thompson, general manager, international, at Tokyo-based music publisher Nichion, says the onus is on UMJ-EMI to develop the foreign-music market.
“With that much repertoire, I think there’s a certain amount of responsibility to try to revitalize the international market in Japan,” he says. “So whether they use the tremendous repertoire (or not), they have to take on that responsibility and take a leadership role, which will be something to monitor.”
On one level, economies of scale make sense in an industry still reeling from the effects of the digital revolution. But that same revolution has made the whole record-company business model increasingly out of step with the times, as more and more artists produce and market recordings without the help of major labels.
Here in Japan, which by default is now the world’s biggest market for “physical” product (i.e., CDs as opposed to digital downloads or streaming), the old-school music-biz paradigm is less threatened than in other major music markets. But UMJ-EMI will eventually have to evolve with the times — or go the way of the dinosaurs.