Virgin Music Co-CEOs Respond to ‘Falsehoods’ Over Downtown Deal

Virgin Music Group co-CEOs JT Myers and Nat Pastor have responded to criticisms of the Virgin/Universal Music Group (UMG) acquisition of Downtown Music Holdings, with particular focus on the negative commentary around Virgin’s role in the independent sector as a result of the ongoing deal.

Some context:

• In December, UMG’s Virgin Music Group revealed it had agreed to buy Downtown Music Holdings LLC in a $775 million deal.

• The acquisition would add Downtown’s portfolio of companies including FUGA, CD Baby and Curve Royalty Systems to UMG’s global operations.

• The deal has come under fire from organizations such as the Independent Music Companies Association (IMPALA) and the UK’s Association of Independent Music, fearing its negative impact on the independent sector.

• The European Commission has set a July 22 deadline to rule on whether the proposed acquisition should be investigated over antitrust concerns.

“Fictions and falsehoods”:

• In the statement to staff, Myers and Pastor say they wish to “bring truth to bear against some of the fictions and falsehoods being spread by the familiar cast of characters, including professional lobbyists, who oppose our companies coming together.”

Customer data:

• They deny allegations that Virgin will exploit Downtown’s customer data to “gain a competitive edge for UMG.”

• They state: “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.”

Shutting down services:

• In response to fears Virgin will restrict or shut down services such as FUGA, Curve, CD Baby, Downtown Music Publishing or Songtrust they state: “Virgin is doing this deal for exactly the opposite reason. We see the extraordinary value of investing in and expanding access to these and other platforms.”

• They add: “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."

Market share:

• In response to the recent claim by IMPALA’s Helen Smith that UMG’s market share in Europe (ex-UK) has jumped by 18 percentage points since the EMI acquisition in 2012 they say: “There is ZERO credible data to support this...and for a very good reason: It’s not true. The reality is that during this period the independent sector’s market share has grown materially, while UMG’s market share has not.”

“Wolf under that cape”:

• The duo also respond to the December statement by Beggars Group’s Martin Mills, who said that Virgin’s Downtown acquisition would be “another step on the road of UMG’s pretence to be the independents’ fairy godmother. But there’s a wolf under that cape.”

• They write: “The insinuation that Virgin is anything but a positive force in the independent marketplace is an insult to all of you who comprise the Virgin Music Group family… Any assertions to the contrary are juvenile, offensive, and are just falsehoods being spread by those who are willing to say anything to hurt the chances of this deal happening.”

“Best partners”:

• The memo concludes with the statement: “With the acquisition of Downtown, we see a significant opportunity to provide independents with something even more effective to advance their commercial and creative goals. We also know that we will be competing every day with dozens of other global service providers, so in order to win we will have to be the best partners the indie community can work with. And that is exactly what we are going to be.”

• The full memo can be read here.