CMA clears Sony’s acquisition of AWAL

The Competition and Markets Authority (CMA) referred the merger to an in-depth Phase 2 inquiry in September 2021, after identifying competition concerns during its initial Phase 1 investigation.

In February 2022 the CMA provisionally concluded that the deal does not substantially reduce competition in the UK and may not be expected to do so in the future. Following a consultation that ended on 4 March 2022, the CMA has upheld its provisional findings and cleared the deal.

Sony is one of the three major record labels active in the UK today, along with Warner and Universal Music Group. In addition to its main label offering, Sony Music Entertainment, Sony also owns The Orchard, an A&L services provider. A&L services typically cover promotion, marketing and distribution. They also allow artists to retain full ownership of their copyrights and a greater percentage of royalties. A&L contracts tend to provide a narrower set of services with less financial support and shorter-term contracts than traditional record contracts.

AWAL is an emerging music distributor offering an alternative to traditional music deals by providing both A&L services and a ‘DIY platform’ that allows artists to upload their own music for distribution.

The CMA’s inquiry focused on the 2 main areas in which the firms’ businesses overlap. It assessed the extent to which The Orchard and AWAL may be expected to compete to provide A&L services. It also looked at how closely Sony and AWAL may be expected to compete to sign successful artists, and those with the potential to become successful, where higher levels of support and investment are provided.

The CMA found that, while not currently competing closely due to their different areas of focus, The Orchard may have become a stronger rival to AWAL in the supply of artist services in future. However, there are many other providers who will continue to compete effectively with both firms – including independent A&L companies, the A&L branches of the other major labels (like Warner’s ADA and Universal Music Group’s Virgin) and independent labels.

In terms of its rivalry with Sony, AWAL is still a relatively small player when it comes to signing artists who require higher levels of support and investment. Despite trying to expand its offering, AWAL was expected to continue to compete with Sony only on a limited basis. In the course of its investigation, the CMA also found that many other firms have begun providing similar services which can be expected to make up for the limited loss of competition from AWAL.

As part of its assessment, the CMA considered a wide range of evidence, including thousands of internal documents from both firms, evidence submitted by their competitors and customers, and its own analysis of market conditions.

Margot Daly, Chair of the independent CMA Inquiry Group, said:

We launched this inquiry as we wanted to be sure that this deal wouldn’t lead to worse outcomes for artists and fans. The music industry is vital to the UK economy and effective competition ensures that it works for everybody.

Having carefully assessed the merger we found that it is not likely to affect competition in a way that will reduce the choice or quality of recorded music available or increase prices.

For more information, visit the Sony / AWAL merger inquiry page.

The CMA is committed to making sure markets are working well for music fans and recently launched a separate probe into music streaming, paying particular attention to the roles played by record labels and music streaming services.

1. All the CMA’s functions in Phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The members of this inquiry group are Margot Daly (Chair), Paul Hughes, John Thanassoulis and Ashleye Gunn. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience.
2. The CMA ran a 3-week consultation on the provisional findings up to 4 March 2022, during which time anyone could make submissions to the CMA. The responses are published on the merger inquiry page.
3. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
4. The CMA launched a separate market study into music and streaming services on 27 January 2022.
5. For media queries, please contact the press office via press@cma.gov.uk or on 020 3738 6460.