CELEX: 32018M8989
Language: en
Date: 2018-10-26 00:00:00
Title: Commission Decision of 26/10/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8989 - Sony Corporation of America / Mubadala Investment Company PJSC) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 26.10.2018
                                                                C(2018) 7293 final
In the published version of this decision, some
information has been omitted pursuant to Article
17(2) of Council Regulation (EC) No 139/2004
concerning non-disclosure of business secrets and
other confidential information. The omissions are                       PUBLIC VERSION
shown thus […]. Where possible the information
omitted has been replaced by ranges of figures or
a general description.
                                                                To the notifying parties
 Subject:            Case M.8989 – Sony / EMI Music Publishing
                     Commission decision pursuant to Article 6(1)(b) of Council
                     Regulation No 139/20041 and Article 57 of the Agreement on the
                     European Economic Area2
 Dear Sir or Madam,
 (1)         On 21 September 2018, the European Commission received a notification of a
             proposed concentration pursuant to Article 4 of the Merger Regulation by which
             Sony Corporation of America ("Sony" or the "Notifying Party", USA),
             belonging to the group Sony will acquire within the meaning of Article 3(1)(b)
             of the Merger Regulation sole control of the whole of EMI Music Publishing
             ("EMI MP", United Kingdom) (the "Transaction"). Sony is hereafter referred to
             as "the Notifying Party" and Sony and EMI MP are hereafter collectively
             referred to as "Parties".
 1.        THE PARTIES
 (2)         Sony is a U.S. subsidiary of Sony Corporation of Japan, which, directly and
             through its subsidiaries, is active globally in various businesses, including
             electronics products, games, entertainment services – including motion pictures,
             television programming, recorded music, and music publishing –, and financial
             services.
 1    OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on
      the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
      replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of
      the TFEU will be used throughout this decision.
 2    OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
 Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
 Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
 Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- (3)      EMI MP is a music publishing business currently jointly controlled by Sony and
         the Mubadala Investment Company PJSC's ("Mubadala"), an investment fund
         based in the United Arab Emirates.
(4)      Sony/ATV Music Publishing ("Sony/ATV") is not a party to the Transaction,
         but has administered EMI MP's catalogue since 2012. Sony/ATV is a music
         publishing company established in 1995 when Sony Music Publishing (a then
         fully owned Sony Corporation subsidiary) and the music publishing business of
         ATV (which Michael Jackson acquired in 1985) were transferred to a 50/50
         venture jointly owned by Sony and the singer/songwriter Michael Jackson. In
         2016, Sony purchased the 50% interest owned by the Michael Jackson Estate,
         which manages the assets formerly owned by Mr. Jackson, thereby acquiring
         sole control of Sony/ATV.3
2.      THE CONCENTRATION
(5)      Pursuant to an Agreement and Plan of Merger dated 29 June 2018, Sony will
         purchase the circa 60% interest in EMI MP controlled by Mubadala for a cash
         consideration of around USD 2.3 billion, acquiring sole control over EMI MP.
(6)      The Transaction therefore constitutes a concentration within the meaning of
         Article 3(1)(b) of the Merger Regulation.
3.      EU DIMENSION
(7)      The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 2 500 million (Sony: EUR […]; EMI MP: EUR […]). 4 Each of
         them has an EU-wide turnover in excess of EUR 100 million (Sony: EUR […];
         EMI MP: EUR […]). In each of France, Germany and the United Kingdom, the
         combined turnover of the Parties exceeds EUR 100 million and their individual
         turnover exceeds EUR 25 million (Germany: Sony: EUR […]; EMI MP: EUR
         […]; France: Sony: EUR […]; EMI MP: EUR […]; the United Kingdom: Sony:
         […]; EMI MP: EUR […]). Lastly, the Parties do not achieve more than two-
         thirds of their aggregate EU-wide turnover within one and the same Member
         State. The notified operation therefore has an EU dimension pursuant to Art 1(3)
         of the Merger Regulation.
4.      CHANGE FROM JOINT TO SOLE CONTROL
(8)      The Transaction involves the acquisition by Sony of sole control over EMI MP
         over which it already has joint control. As such, the concentration qualifies in
         principle for simplified treatment, in accordance with paragraph 5 (d) of the
         Commission Notice on a simplified procedure for treatment of certain
3   Commission decision of 1 August 2016 in Case M.8018 Sony Corporation of America/Sony-ATV.
4   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission
    Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).
                                                        2
 ---pagebreak---             concentrations under Council Regulation (EC) No 139/2004 (the "Notice on
            simplified procedure").5
(9)         In considering whether or not to apply the simplified procedure, it is important
            context that in Sony/Mubadala/EMI,6 the Commission approved the acquisition
            by Sony and Mubadala of joint control over EMI MP subject to conditions and
            obligations. A key consideration in the clearance decision was that Sony did not
            have full control neither over Sony/ATV nor over EMI MP due to the joint
            control situation in both entities.7 As the Transaction gives Sony sole control
            over EMI MP, having regard to this precedent the Commission considers that
            the Transaction warrants a closer investigation and a full decision in accordance
            with paragraph 9 of the Notice on simplified procedure.
(10)        The Transaction follows a second transaction involving Sony. This one involved
            Sony acquiring sole control over Sony/ATV previously jointly controlled by
            Sony and the Michael Jackson Estate, through the acquisition of Michael
            Jackson Estate’s 50% stake. The Commission declared this transaction, pursuant
            to article 6(1)(b) of the Merger Regulation, to be compatible with the internal
            market in August 2016.8
(11)        As a result of these two previous transactions Sony already exercises joint
            control over EMI MP together with Mubadala and has sole control over
            Sony/ATV, its wholly-owned music publishing subsidiary, in charge of
            licensing publishing rights, i.e. the rights to the melody and the lyrics which are
            transferred from the authors (i.e. the writers and composers) to music publishers,
            which in turn license them to record companies and other commercial users such
            as online platforms.
(12)        Sony/ATV has administered EMI MP’s catalogue on an exclusive basis under
            an administration agreement since 2012, managing relationships with EMI MP’s
            existing authors and signing agreements for new authors whose rights are co-
            owned by Sony/ATV and EMI MP. Sony/ATV and EMI MP have not competed
            for new authors since 2012. Downstream, EMI MP has had no independent role
            in licensing its repertoire. Instead, Sony/ATV has had the sole and exclusive
            right to license EMI MP’s various publishing rights offline, while online,
            Sony/ATV has negotiated “blanket” licences9 of Sony/ATV and EMI MP
            content and has represented Sony/ATV and EMI repertoire in direct negotiations
            with Digital Service Providers (hereinafter “DSPs”).
(13)        Moreover, Sony has no other music publishing interests. The Transaction will
            therefore not lead to any increase in market share in the various markets
            involving music publishing (unlike in Sony/Mubadala/EMI, where the
            acquisition led to an increase in Sony's market shares).
5   OJ C 366/5 14.12.2013.
6   Case COMP/M.6459 Sony/Mubadala/EMI Music Publishing, Commission decision of 19 April, 2012
    ("Sony/Mubadala/EMI").
7   Sony/Mubadala/EMI, recital 210.
8   Case COMP/M.8018, Sony Corporation of America/Sony-ATV Music Publishing, European
    Commission decision of August 1, 2016 ("Sony/Sony-ATV")
9   i.e. licenses covering the entirety of both parties’ Anglo-American repertoire.
                                                           3
 ---pagebreak--- (14)       In addition, Sony has currently full control and ownership over Sony Music
           Entertainment ("Sony Music"), a record label (or record company) in charge of
           licensing recording rights, i.e. the rights to the particular recorded rendition of a
           song which are transferred by the recording artists to record labels. Sony is
           therefore an "integrated music company", having both a publishing division and
           a recorded music division. In the market for the exploitation of online rights, the
           online customers need a licence not only for publishing rights but also for
           recording rights. This is because to make a song available on an online platform
           it is necessary to license the rights both to the notes and the lyrics of that song
           (publishing rights) and to the actual recorded version of the same song
           (recording rights). To the extent that these recording rights do not only cover
           songs over which Sony/ATV and/or EMI MP hold publishing rights (i.e. to the
           extent that they cover at least some songs whose publishing rights are held by
           third parties), these recording rights expand the list of songs over which Sony
           has control and may therefore increase Sony's market power vis-à-vis online
           music platforms.
(15)       The main change brought about by the Transaction relates to the possibility of
           Mubadala to veto certain commercial decisions of EMI MP. Mubadala, through
           its joint control over EMI MP, can currently exercise a veto over the acquisition
           of music publishing catalogues or rights and interests in other musical works, as
           well as over the issuance of music publishing licenses negotiated by Sony/ATV
           that it considers not to be in EMI MP's interest. Mubadala's constraint over any
           possible strategy of Sony that would not be in the best interest of EMI MP will
           disappear post-Transaction.
5.       RELEVANT MARKETS
(16)       In past decisions, the Commission considered that music publishers are active
           on two market levels.10 Upstream, they are active in the supply of publishing
           services to authors. Downstream, music publishers are active in the exploitation
           of works of authors.
5.1.     Market for the provision of music publishing services to authors
5.1.1. Relevant product market
(17)       The services provided to authors include providing artistic and financial
           support,11 matching authors with co-writers and performing artists, ensuring
           legal protection of musical works, promoting authors’ works to potential
           licensees, marketing and negotiating the licensing of rights, and administering
           authors’ rights (including registrations with and collections from collecting
10  Sony/Mubadala/EMI, recital 19; COMP/M.4404, Universal/BMG Music Publishing, Commission
    decision of May 22, 2007 ("Universal/BMG"), and M.1219 Seagram/Polygram, recitals 11 and 16.
    Sony/Sony-ATV, recitals 14, 35, and 47
11 Publishers pay advances to authors against future royalty income. Where a publisher has paid an
    advance to an author, the royalties earned by that author’s work will first be used to recoup the amount
    of the advance (other than any writer’s share mandated by collecting societies). The author will receive
    royalties (split in the agreed proportions between the author and publisher) only once the publisher has
    recouped the amount paid out to the author in advance. The publisher assumes the risk of the revenues
    achieved from the exploitation of an author’s work not covering the amount paid out in advance.
                                                          4
 ---pagebreak---           societies). In return for providing these services, a publisher receives a share of the
          royalties generated by an author’s work.12
(18)      In previous decisions, the Commission defined the upstream market as the
          market for publishing services to authors.13
(19)      The Notifying Party submits that there is no reason to depart from this market
          definition, for the following reasons. In respect of any given song, authors
          generally contract with a music publisher to exploit all of their rights (rather
          than in relation to separate categories of rights (e.g. mechanical rights only)),
          and publishers are involved in the exploitation of all of those rights. Music
          publishers exploit the rights in a work for the duration of their contract with an
          author (plus any agreed retention period). No meaningful distinction is made
          between “front-line” and “back-catalogue” works, and music publishers
          compete to acquire rights to repertoire, and to identify and sign authors and
          catalogues.
(20)      The market investigation in the present case has not provided any indications
          that the Commission should depart from its previous findings on the distinction
          between publishers' upstream and downstream markets. Indeed these activities
          are different and take place at different levels of the music value chain (although
          they are commercially related as music publishers are able to license
          downstream the works and the catalogues of the authors to whom they provide
          music publishing services upstream).
(21)      Accordingly, and consistent with the Commission’s approach in Sony/Sony-
          ATV, the Commission considers it appropriate to define the relevant upstream
          product market as comprising the provision of publishing services to authors.
5.1.2. Relevant geographic market
(22)      In Sony/Sony-ATV and Sony/Mubadala/EMI Music Publishing, the Commission
          identified various factors suggesting that the market for publishing services
          provided to authors was national in geographic scope, although ultimately it did
          not reach a firm conclusion.14 The Commission conducted its assessment of
          those two transactions on a national basis.
(23)      Sony submits that there is no reason to depart from the approach followed by the
          Commission in Sony/Sony-ATV and Sony/Mubadala/EMI Music Publishing.
(24)      The market investigation did not reveal any facts that would make it necessary
          to reconsider the geographic market definition of the market for the publishing
          services to the authors.
(25)      The Commission therefore considers that the market for the provision of
          publishing services to authors is rather national in scope.
12  Some authors – particularly more established authors – do not use the services of a music publisher
    and instead publish their works themselves.
13 Sony/Sony-ATV, recital 15.
14 Sony/Sony-ATV, paragraph 58, and Sony/Mubadala/EMI, paragraphs 62 to 64. See also Case
    COMP/M.4404, Universal/BMG Music Publishing, Commission decision of May 22, 2007
    ("Universal/BMG"), recital 61.
                                                      5
 ---pagebreak--- 5.2.    Markets for the exploitation of copyrights
5.2.1. Relevant product markets
(26)      In previous decisions in the music sector,15 the Commission identified five
          different categories of copyrights constituting separate product markets at the
          market level where music publishers deal with (prospective) users of works:
        (a)     mechanical rights: the right to reproduce a work in a sound recording;
        (b)     performance rights: the right for commercial users such as broadcasters
                (TV or radio stations), concert halls, theatres, night clubs, restaurants to
                divulge a work to the public;
        (c)     synchronisation rights: the right for commercial users such as advertising
                agencies or film companies to synchronise music with a visual image;
        (d)     print rights: the right to reproduce a work in sheet music;
        (e)     online rights: a combination of mechanical and performance rights to
                exploit a work via downloading and/or streaming services. The market for
                the exploitation of publishing rights for online use (hereafter the market
                for "online rights") is the market where music publishers, such as
                Sony/ATV and EMI, license their repertoire to DSPs, such as Apple,
                Spotify and Deezer.
(27)      From a demand-side perspective, separate markets for the exploitation of each
          type of right exist because there is no substitutability between the different
          categories of rights. Depending on the intended use of the musical work
          (broadcast, sheet music, use in a film etc.), the right user requires a license for a
          specific type of right, which is not substitutable with a license for a different
          type of right.
(28)      In addition, the Commission found important differences between the different
          types of rights from a supply-side perspective, the main difference being related
          to the role of the collecting societies.16 Namely, the licensing of mechanical and
          performance rights for offline use is generally carried out by collecting societies
          on behalf of publishers. By contrast, synchronization and print rights are
          generally licensed and administered directly by the publishers without the
          involvement of collecting societies. Online rights are subject to a hybrid solution
          whereby mechanical rights over songs authored by writers registered to “Anglo-
          American” collecting societies (hereinafter "Anglo-American repertoire") are
          generally licensed directly by publishers whereas performance rights over songs
          from the Anglo-American repertoire as well as mechanical and performance
          rights over songs authored by writers registered to “Continental European”
          collecting societies (hereinafter "Continental European repertoire") are licensed
          by collecting societies without any influence from the publishers as to the level
          of royalties and on whether or not to grant a license. The different role by the
          collecting societies resulted in different supply conditions as collecting societies
          were legally bound to license on fair and non-discriminatory manner, whereas
15  Universal/BMG, Sony/Mubadala/EMI and Sony/Sony-ATV
16  Sony/Mubadala/EMI, recital 25.
                                                   6
 ---pagebreak---           publishers are not subject to the same obligations. Furthermore, pricing and
          other licensing conditions also differed depending on involvement of collecting
          societies and thus on the control over these terms.
(29)      The Notifying Party did not contest this approach.
(30)      The market investigation did not reveal any facts that would make it necessary
          to reconsider the product market definition of the markets for the exploitation of
          publishing copyrights. A majority of competitors and customers who replied to
          the market investigation consider that the market for music publishing rights
          should still be defined according to the distinction between (1) print rights; (2)
          synchronization rights; (3) performance rights (offline, traditional applications);
          (4) mechanical rights (offline, traditional applications); and (5) online
          (performance + mechanical) rights.17 The Commission therefore considers it
          appropriate to follow the same approach as in previous decisions and to define a
          separate market for the exploitation of each major type of publishing right.
(31)      As regards the market for online rights, in Sony/Sony-ATV, the Commission
          considered that the market for online rights should not be further segmented
          according to genres, access devices, and retail model (streaming vs.
          downloading). The Commission left open whether a distinction should be made
          according to the type of repertoire (Anglo-American vs. Continental).
(32)      Sony considers that in the case of online rights, the relevant product market is
          the overall market for the licensing of online rights in musical works and that a
          further segmentation is not justified.
(33)      With regard to the potential subdivisions within the market for the exploitation
          of online rights, during the market investigation the vast majority of the
          respondents to the market investigation considered that separate markets should
          not be distinguished according to genres.18 Despite the fact that there exist music
          publishers that are specialised in certain genres of music only,19 those publishers
          tend to be marginal as most publishers tend to offer all genres.20
(34)      The market investigation confirmed that it is not appropriate to distinguish
          separate markets within the market for the exploitation of online rights
          according to access device, i.e. between the exploitation of online rights for use
          in mobile applications and the exploitation of online rights for use in other
          online applications, such as tablets and personal computers.21 Market
          respondents generally agree that such a distinction is not necessary given (i) the
          convergence between access devices; (ii) the fact that rights are identical
          irrespective of access device; and (iii) the fact that these forms of access are
          competing.22
17 See Questionnaire Q1 to competitors, question 3.1; Questionnaire Q2 to online customers, question 3.1.
18 See Questionnaire Q1 to competitors, question 7; Questionnaire Q2 to online customers, question 7.
19 See Questionnaire Q1 to competitors, question 8; Questionnaire Q2 to online customers, question 8.
    Only one respondent identified a streaming service specialized in one genre.
20 See Questionnaire Q1 to competitors, questions 8.1 and 8.2; Questionnaire Q2 to online customers,
    questions 8.1 and 8.2.
21 See Questionnaire Q1 to competitors, question 6; Questionnaire Q2 to online customers, question 6.
22 See Questionnaire Q1 to competitors, question 6.1; Questionnaire Q2 to online customers, question 6.1.
                                                        7
 ---pagebreak--- (35)      As to the potential segmentation of the market for the exploitation of online
          rights based on the retail model (streaming and downloading), a majority of
          competitors and customers considered that such a distinction is not
          appropriate.23 Respondents pointed out that the licensed rights and the
          repertoire are identical with differences in licensing terms and conditions
          resulting only from the technical differences between a download and a
          streaming offering.24 Furthermore, on the supply side, these rights are held by
          the same entities regardless of which service (download or streaming) is being
          provided.25 Given, the majority view as well as the recent precedent of
          Sony/Sony-ATV, the Commission considers that the market for the exploitation
          of online rights should not be further subdivided based on the retail model.
(36)      Finally, a majority of competitors and customers consider that the two
          repertoires (Anglo-American vs. Continental) are part of the same market.26
(37)      In this regard, the Commission considers that no distinction should be made
          according to the type of repertoire. This is because on the supply side, all large
          publishers active in the EEA seek to develop a balanced repertoire comprising
          both Anglo-American and Continental European repertoire. From a demand side
          perspective, DSPs aim at having licenses over the rights of as many songs as
          possible irrespective of whether they belong to the Anglo-American repertoire
          or the Continental European repertoire. All online platforms include both
          repertoires. In this context, the Commission considers that the market power of a
          music publisher vis-à-vis DSPs comes from the importance for DSPs of the
          catalogue of songs under the music publisher's direct control. The Commission
          considers that this market power can only be assessed by comparing the size and
          the quality of this catalogue with the overall set of songs the DSPs aim to get
          access to irrespective of whether these songs belong to the Anglo-American
          repertoire or the Continental European one. It would not be appropriate to
          measure the market power of a music publisher by reference to the share of
          songs it controls within one specific repertoire.
(38)      That being said, the rights for the Continental European repertoire remain with
          collecting societies whereas all major publishers withdrew their online
          mechanical rights over the Anglo-American repertoire from the collecting
          society system and thus took control over these rights. The market power of
          publishers should therefore be assessed by reference to the size and quality of
          the Anglo-American repertoire that they control as compared to the overall sets
          of rights from both the Anglo-American and the Continental European catalogue
          that DSPs need to clear.
(39)      Overall, in view of the results of the market investigation, and the market
          definitions applied in previous decisions, the Commission takes the view that in
          relation to the downstream activity of the exploiting publishing rights:
23 See Questionnaire Q1 to competitors, question 9 and Questionnaire Q2 to online customers, question 9.
24 See Questionnaire Q1 to competitors, question 9.1 and Questionnaire Q2 to online customers, question
    9.1.
25 See Questionnaire Q2 to online customers, question 9.1.
26 See Questionnaire Q1 to competitors, question 5.1; Questionnaire Q2 to online customers, question 5.1.
                                                        8
 ---pagebreak---         (a)     The market should be subdivided into separate markets based on the type
                of rights, i.e. mechanical rights; performance rights; synchronization
                rights; print rights; and online rights.
        (b)     The market for the exploitation of online rights is not to be further
                subdivided according to genres, access devices and retail model
                (download vs. streaming).
        (c)     The market for the exploitation of online rights should not be further
                subdivided according to the type of repertoire (Anglo-American and the
                Continental).
5.2.2. Relevant geographic market
        Commission precedents
(40)      As regards the geographic market definition, in previous decisions, the
          Commission took the view that, with the exception of the market for online
          rights, the markets for the exploitation of the various publishing rights are
          national in scope.
(41)      With regard to the market for online rights, in Sony/Sony-ATV,27 the
          Commission concluded that the market for licensing of online rights was EEA-
          wide, at least in relation to the Anglo-American repertoire.
        Notifying Party's view
(42)      Sony also considers that the relevant market for online rights is EEA-wide in
          scope for the following reasons. First, all major Digital Service Providers
          ("DSPs") operate on the basis of at least EEA-wide licences, and even DSPs that
          are not active across the EEA nevertheless generally obtain EEA-wide licences.
          Second, Sony/ATV's and EMI MP's royalty rates are uniform across EEA
          member states, as are most other terms and conditions ([information on
          Sony/ATV’s licensing terms]). Third, [information on Sony/ATV’s minima].
          Minima are guaranteed minimum prices that the licensee has to pay regardless
          of the actual revenue generated by the online platforms downstream. It is part of
          the common pricing formula in licences whereby the licensee has to pay the
          higher of the contractual royalty rates or the guaranteed per-stream/per-
          subscriber minima. Sony submitted evidence showing that these variations in the
          minima are driven by differences in downstream DSP pricing across Member
          States to reflect differing levels of consumer purchasing power, rather than by
          market concentration and market shares.
        Commission's assessment
(43)      The Commission considers that the market investigation did not reveal any facts
          that would make it necessary to reconsider the geographic market definition of
          the markets for the exploitation of mechanical rights, performance rights,
          synchronization rights and print rights. It appears therefore appropriate to
          consider that these markets are still national and not EEA-wide. In any event,
27  Sony/Sony-ATV, recital 67.
                                                    9
 ---pagebreak---           the geographic market definition pertaining to these product markets can be left
          open as no competition concerns arise under any plausible market definitions.
(44)      Overall, the Commission considers that the finding in Sony/Sony-ATV that the
          market for online rights is EEA-wide is still valid today.
(45)      First, the Notifying Party provided evidence that all major DSPs operate on the
          basis of at least EEA-wide licences. More specifically, […]% of Sony/ATV’s
          and EMI MP’s revenue from the licensing of Anglo-American repertoire, are
          licensed under agreements with DSPs that are EEA-wide or broader in
          geographic scope, with […]% of revenues generated by multi-territory licence
          agreements narrower than the EEA and […]% national licenses ([…]).28The
          Notifying Party also provided evidence that even DSPs that are not active across
          the EEA nevertheless generally obtain EEA-wide licences. This contrasts with
          the situation at the time of Sony/Mubadala/EMI Music Publishing.29
(46)      [Information on the current licences and licensing practice of Sony/ATV and
          EMI MP].30
(47)      Second, the Notifying Party provided evidence that Sony/ATV's and EMI MP's
          royalty rates are uniform across EEA member states, as are most other terms and
          conditions ([information on Sony/ATV’s licensing terms]). In practice, the
          Notifying Party submitted a review of Sony/ATV’s licensing agreements with
          its principal online customers (by revenue). This review shows that [information
          on Sony/ATV’s licensing terms]:31
        (a)      In each of the agreements, [information on Sony/ATV’s licensing terms].
        (b)      For both download and streaming services, [information on Sony/ATV’s
                 licensing] the same royalty rate across all EEA Member States. For ad-
                 funded and subscription streaming services, the royalty rate is typically
                 […]%; for download services, the royalty rate is typically […]% or […]%,
                 but for a given DSP, the rate is the same across all EEA Member States.32
        (c)      For each DSP, the agreements provide [information on Sony/ATV’s
                 licensing terms].33
        (d)      Minima for ad-funded streaming services [information on Sony/ATV’s
                 minima].34
(48)      [Information on Sony/ATV’s and EMI MP’s licence negotiations with DSPs]
          variation across territories in the minima that apply for certain subscription
          streaming services. [Information on Sony/ATV’s and EMI MP’s licence
28  See Form CO, paragraphs 6.25-6.27.
29 See Form CO, paragraphs 6.29-6.30.
30 See Form CO, paragraphs 6.31- 6.32.
31 See Form CO, paragraph 6.33.
32 There are two isolated exceptions [information on Sony/ATV’s licensing terms]. These variations were
   agreed [information on Sony/ATV’s licensing negotiations], for ease of administration, [information
   on Sony/ATV’s licensing terms].
33 [Information on Sony/ATV’s licensing terms].
34 [Information on Sony/ATV’s licensing terms].
                                                      10
 ---pagebreak---           negotiations with DSPs] to reflect their downstream pricing strategy, to reflect
          differing levels of consumer purchasing power, [information on Sony/ATV’s
          and EMI MP’s licence negotiations with DSPs].35
(49)      In any event, Sony submitted empirical evidence showing that these variations
          in the minima correlate with consumer purchasing power, rather than with
          market concentration and market shares. More specifically, the Notifying Party
          provided the results of an empirical analysis showing that based on minima for
          [several DSPs], variation in music publishing and recorded music minima
          correlate closely with consumer purchasing power, as reported by Eurostat 2017
          price level index for household final consumption expenditure. The correlation
          coefficient between these two series is 92% for each of music publishing and
          recorded music.36 On the contrary, based on the same licensing agreements, the
          Notifying Party showed that there is no positive correlation between national
          “control shares” and minima. A music publisher's control share is the share of
          all songs made available for streaming or downloading by DSPs that that
          publisher controls through fractional or full publishing rights or even recording
          rights in the case of an integrated music company. The correlation coefficient
          for publishing (Sony/ATV and EMI MP combined) “control shares” against
          minima is -37%; while the correlation coefficient for Sony/ATV, EMI MP, and
          Sony Music’s combined “control shares” against minima is -10%. This means
          that minima do not tend to increase when control shares increase.
(50)      The Commission considers that the fact that the minima are adjusted to reflect
          consumer spending power and do not correlate with control shares shows that
          the variation is due to different levels of income and development rather than
          different competitive conditions in different countries. This suggests that a
          hypothetical monopolist in one specific Member State would not be able to
          profitably and significantly increase prices.
(51)      The results of the market investigation confirm this conclusion.
(52)      First, a majority of Sony's competitors confirmed that their licenses for online
          rights were either worldwide in scope or pan-European.37 The major DSPs also
          confirmed that they mainly operate on the basis of at least pan-European
          licenses.38
(53)      Furthermore, the vast majority of Sony's competitors expressing a view on the
          matter acknowledged that major terms and conditions of licensing agreements
          by music publishers do not vary across Member States, whether for streaming or
          downloading. The only two competitors replying that, according to them, major
          terms and conditions vary across Member States, only claimed that minima per
          subscriber for streaming services vary across Member States and made a
35 The Notifying Party explained that the purpose of contractual minima is to broadly reflect the value of
   online royalty rates while providing DSPs with flexibility in their consumer pricing models.
   [Information on Sony/ATV’s licensing terms].
36 The correlation coefficient (a value between -1 and +1) measures how strongly two variables are
   related to each other. A correlation coefficient of 92% indicates a very strong positive correlation, i.e.
   i.e. minima tend to increase when purchasing power increases.
37 See Questionnaire Q1 to competitors, question 11.
38 See Questionnaire Q2 to online customers, question 11.
                                                        11
 ---pagebreak---          distinction in this respect between mainly Eastern European countries and to
         some extent Southern European countries versus North-Western countries.39
(54)     DSPs also confirmed that, for a given licensor, the key terms and conditions do
         not differ significantly from one Member State to the other, with the exception
         of minima.40
(55)     The market investigation aimed at verifying Sony's argument (and the evidence
         it submitted) according to which the only term that varies significantly from one
         Member State to the other is the minimum royalty, and that variations in the
         minima are driven by differences in downstream DSP pricing across Member
         States to reflect differing levels of consumer purchasing power, rather than by
         different levels of market concentration of publishers and market shares. The
         Commission therefore requested music publishers to provide their market share
         and details over the headline royalty rate and minima applied in each EEA
         member state with the major online platforms. Their responses confirm that, for
         a given DSP and licensor, headline royalty rates do not vary across Member
         States (with only few exceptions) whereas minima per subscriber (for streaming
         services platform) typically vary between different Member States. However, no
         relationship was found between contractual minima and revenue shares in a
         given Member State. Instead, as claimed by Sony, variations in the contractual
         minima seem to be driven by differences in downstream DSP pricing across
         Member States to reflect differing levels of consumer purchasing power, as
         minima per subscriber (for various streaming services) strongly correlate with
         price levels, as measured by Eurostat 2017 price level index for household final
         consumption expenditure.41
(56)     Finally, Sony/ATV & EMI MP's competitors who negotiate online licenses
         directly with DSPs confirmed that advances do not vary across Member States,
         instead there is a single advance covering the pan-European license. They also
         confirmed that the Anglo-American repertoire and the service description
         licensed to a DSP is similar across all EEA Member States, and that other usage
         terms, such as the grant of rights enabling the licensee to offer free trials, family
         or student subscriptions, and/or promotional discounts at discounted royalties,
         apply uniformly across all EEA Member States.42
(57)     Given the above considerations, the Commission takes the view that the market
         for licensing of online rights is EEA wide.
6.     COMPETITIVE ASSESSMENT
(58)     In assessing the competitive effects of a proposed concentration, the
         Commission compares the competitive conditions that would result from the
         notified merger with the conditions that would have prevailed without the
39 See Questionnaire Q1 to competitors, questions 13.1 and 13.2.
40 See Questionnaire Q2 to online customers, questions 13-16.
41 See Questionnaire Q1 to competitors, questions 14-15. Price level indices were sourced from data
   sourced from: http://ec.europa.eu/eurostat/statistics-
   explained/index.php/Comparative price levels of consumer goods and services#Overall price lev
   els
42 See Questionnaire Q1 to competitors, questions 16-18
                                                         12
 ---pagebreak---          merger. The competitive conditions existing at the time of the merger usually
         constitute the relevant comparison for evaluating the likely effects of a merger.43
(59)     In the case at hand, in line with the analytical framework developed in previous
         cases concerning the music publishing sector and, in particular,
         Sony/Mubadala/EMI and Sony/Sony-ATV, and following the concerns raised by
         some respondents, the Commission focused its investigation primarily on
         whether the Transaction (and, in particular, the elimination of Mubadala as a
         jointly controlling shareholder of EMI MP) may lead to increased market power
         for Sony in the market for the exploitation of online rights relating to the Anglo-
         American repertoire. The Commission also assessed the possible impact of the
         change from joint to sole control on the other relevant markets, i.e. the market
         for the provision of music publishing services to authors, as well as the various
         markets for the exploitation of different categories of publishing rights offline.
         The Commission also investigated a number of markets that would technically
         be affected by the Transaction with a view to assessing whether the Transaction
         would lead to an increased ability and/or incentive on the part of Sony to engage
         in input foreclosure in relation to certain Sony/ATV’s publishing rights. These
         are explained below in sections 6.1, 6.2 and 6.3, respectively.
6.1.    Horizontal effects on the market for the exploitation of online rights
6.1.1. The merger specific concern in view of the Commission's precedents
(60)     In relation to online rights, the potential concern which the Commission
         investigated is whether the Transaction would increase the merged entity's
         bargaining position vis-à-vis DSPs, in a way that Sony would be able to increase
         its price or otherwise worsen its licensing terms.
(61)     In Universal/BMG, the Commission considered that publishers with a large
         repertoire may exercise bargaining power on online music platforms and impose
         higher rates or other unfavourable terms and conditions by threatening not to
         license music rights to online platforms. In its following decisions
         (Sony/Mubadala/EMI and Sony/Sony-ATV), the Commission continued to assess
         the impact of transactions in this framework.44
(62)     In the context of the Transaction, one should recall that Sony has exercised joint
         control over EMI MP, and Sony/ATV has administered EMI MP’s catalogue
         under an Administration Agreement. As a result, EMI MP has had no
         independent role in licensing its repertoire (or in signing and retaining authors)
         with DSPs. Instead, Sony/ATV has negotiated “blanket” licences of Sony/ATV
         and EMI MP content and has represented Sony/ATV and EMI repertoire in
         direct negotiations with DSPs as if Sony/ATV and EMI MP were one company.
         Therefore, taking music publishing rights on a standalone basis, the Transaction
         will have no effect on Sony/ATV’s negotiation of online licenses with DSPs, as
         the size of its music publishing repertoire does not increase with the
         Transaction.
43  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings, OJ C 31, 05.02.2004, p. 5-18, paragraph 9.
44 See e.g. Universal/BMG, recital 251. Sony/Mubadala/EMI, recital 173 and Sony/Sony-ATV, recital 70.
                                                      13
 ---pagebreak--- (63)      Accordingly, the Transaction will also not increase Sony/ATV’s and EMI MP’s
          combined EEA share of online music publishing revenues, which amounted to
          around 25% in 2017 (see Table 1).
Table 1: Estimated EEA online music publishing rights revenues and market shares
                                       2015                           2016                        2017
                               Value                        Value                        Value
                                               Share                          Share                     Share
      Competitor              (€’000)                      (€’000)                      (€’000)
      Sony/ATV                   […]        [10-20]%         […]           [10-20]%       […]         [10-20]%
      EMI MP                     […]        [10-20]%         […]           [10-20]%       […]         [10-20]%
      Combined                   […]        [20-30]%         […]           [20-30]%       […]         [20-30]%
      Universal                  […]        [20-30]%         […]           [20-30]%       […]         [20-30]%
      Warner/Chappell            […]        [10-20]%         […]           [10-20]%       […]         [10-20]%
      BMG                        […]         [5-10]%         […]            [5-10]%       […]          [5-10]%
      Concord (formerly
                                 […]          [0-5]%         […]             [0-5]%       […]           [0-5]%
      Imagem)
      Kobalt                     […]         [5-10]%         […]             [0-5]%       […]           [0-5]%
      Peer                       […]          [0-5]%         […]             [0-5]%       […]           [0-5]%
      Others                     […]        [20-30]%         […]           [20-30]%       […]         [20-30]%
      Total                      […]           100%          […]              100%        […]            100%
                                           Source: Sony/ATV estimates
(64)      However, several of Sony's music publishing competitors complained that
          changing Sony's control over EMI MP from joint to sole control will
          significantly increase Sony's bargaining position vis-à-vis DSPs. They argue that
          the move from joint to sole control enables Sony to leverage across both its
          recording music rights (Sony Music) and music publishing rights (Sony/ATV
          and EMI MP) when negotiating with DSPs.
(65)      As explained above (see recital (14)), in the market for the exploitation of online
          rights, the online customers need a licence not only for publishing rights but also
          for recording rights.45 In order to offer a title in its service, an online music
          provider must acquire licences not only for all co-publishing rights but also for
          recording rights relating to this title.
(66)      As Sony and other major publishers also have a recording business, recording
          rights may also increase their bargaining power vis-à-vis DSPs to the extent that
          the recording rights expand the list of songs over which the publisher has
          control. And this is the case in practice. Integrated music companies – i.e.
          having both a music publishing and a recorded music divisions – usually have
          recording and publishing rights covering different musical works with only
          partial overlaps. Indeed, it happens very often that for a specific song a publisher
          holds (part of) the publishing rights over that song whereas a totally independent
          record label holds the recording rights.
(67)      Publishers who also have a recording business have control over a larger set of
          songs for which they can threaten not to license music publishing rights and/or
          recording rights to online platforms (hold up). This may increase their
45 In the music industry publishing rights represent the rights to the melody and the lyrics and are
   transferred from the authors to publishers. Recording rights represent rights to the particular recorded
   rendition of a song and are transferred by the recording artists to record labels.
                                                        14
 ---pagebreak---      bargaining power vis-à-vis DSPs. In this case, the revenue shares from
     publishing may significantly understate the real market power of the music
     company.
(68) In the case at hand, the repertoire of songs over which Sony has publishing
     rights only partially overlaps with the repertoire of songs over which it holds
     recording rights. More specifically, based on the unweighted aggregated weekly
     charts control shares at an EEA-level (see section 6.1.3.3 below), Sony has no
     publishing rights over […]% of the songs over which it has recording rights.
     Only these songs potentially provide Sony with additional leverage vis-à-vis
     DSPs.
(69) Moreover, in many cases several authors under contract with different
     publishers write a song together, which leads to split copyrights (co-publishing)
     among publishers. Each author owns a share of the song and each publisher
     administers the shares of the author under contract. As, in order to offer the
     song, an online music provider needs to have a licence for all fractional
     publishing rights, each publisher can veto the inclusion of the song in the online
     platform's service. In this sense having a fractional ownership rights gives a
     publisher full control over the songs to which these rights relate, and thus over a
     share of the (Anglo-American) repertoire, yet on a revenue basis the publisher
     receives only the fraction of the licence fees related to the songs and as a result
     its market power would be underestimated on a revenue share basis.
(70) In line with previous cases (Sony/Sony-ATV and Sony/Mubadala/EMI), the
     Commission, therefore, considers that market shares on the basis of revenues
     alone might not fully reflect the market positions of the different publishers
     since they do not adequately take into account their power on the basis of co-
     publishing and recording rights.
(71) To adequately reflect these factors and to give a better measure of the publishers'
     or integrated music company's market power, the Commission developed the
     concept of "control shares". A music publisher's control share is the share of all
     songs made available for streaming or downloading by DSPs that that music
     publisher controls through fractional or full publishing rights or even recording
     rights in the case of an integrated music company. For the publishing rights,
     Sony/ATV only has control over the pricing negotiation with DSPs of the tracks
     that form part of the Anglo-American repertoire of Sony/ATV and EMI MP,
     since the rights over the tracks that form part of the Continental European
     repertoire are licensed by national collecting societies on a national or multi-
     territorial basis with no control by Sony/ATV or EMI MP. In contrast, for
     recording rights, Sony Music is in charge of licensing all tracks where the
     recorded rights are held by Sony Music, irrespective of whether the track is part
     of the Anglo-American or Continental European repertoire.
(72) In Sony/Mubadala/EMI, the Commission considered that Sony would be able to
     negotiate with DSPs by leveraging across both of its music publishing
     catalogues (Sony/ATV and EMI MP), as the Commission considered that the
     interests of Mubadala and Sony would be aligned as regards maximising
     publishing revenues. The Commission therefore calculated the combined control
     shares of Sony/ATV and EMI MP. In contrast, the Commission considered that
     Sony would not be able to leverage the strength of both its publishing
     (Sony/ATV and EMI MP) and recording (Sony Music) repertoires in the
                                            15
 ---pagebreak---          negotiations with DSPs to obtain the best overall deal possible because of the
         ownership structure of Sony/ATV and EMI MP. As both would be partly
         controlled by an independent entity (Mubadala for EMI MP and the Michael
         Jackson Estate for Sony/ATV) and as the Commission considered that
         maximising combined revenues of publishing and recording would involve a
         sacrifice on the publishing side for the benefits of the recording interests,46 the
         Commission concluded that it was unlikely that the merged entity would engage
         in joint negotiations of recording and publishing rights to optimise its bargaining
         power. The Commission therefore did not add the control shares of Sony
         Music.47
(73)     In Sony/Sony-ATV, the Commission considered that post-transaction Sony
         would be able to leverage either across Sony/ATV and EMI MP (as it was
         already the case before the transaction) or across Sony/ATV and Sony Music –
         as a result of the transaction Sony/ATV would become fully controlled by Sony,
         as was Sony Music already, making it possible to adopt a strategy maximising
         combined profits. Control shares were therefore combined 2 by 2, and the
         increment caused by the transaction was the increased control share when
         comparing the combined control shares of Sony/ATV and Sony Music with the
         combined control shares of Sony/ATV and EMI MP. Again, the Commission
         considered that Sony would not be able to leverage across the three divisions, as
         Mubadala's interest was only to maximise publishing revenues, and Mubadala
         would have disagreed with a strategy to maximise combined revenues.
(74)     With the Transaction, the constraint imposed by Mubadala will disappear. This
         implies that, in view of the Commission's precedents, the Transaction has the
         potential to enable Sony to leverage its publishing rights of both Sony/ATV and
         EMI MP together with its recorded music rights (Sony Music) to increase its
         bargaining power vis-à-vis DSPs. However, to the extent that the increased
         bargaining power of Sony would be used to extract better terms both on the
         recording and the publishing side, this would already have been possible pre-
         merger, as this would have benefitted Mubadala (the investment company
         having joined control over EMI MP with Sony), which would therefore not have
         vetoed such strategy.
(75)     Therefore the only merger specific concern in view of the Commission's
         precedents is that the Transaction may enable Sony to sacrifice music publishing
         revenues to achieve higher revenues in recorded music, and overall. If this
         concern is confirmed the Commission would have to assess the increase in
         Sony's bargaining power vis-à-vis DSPs by analysing the increase in Sony's
         control shares caused by the addition of EMI MP's Anglo-American repertoire
         to the combined control shares of Sony/ATV and Sony Music.
(76)     Furthermore, according to one of the complainants (Impala, an association of
         independent music companies), the Transaction will also enable Sony to
         negotiate more guaranteed places on playlists. In particular, Impala explained
         that a music company with a greater control share is able to get its songs more
         prominently positioned in the important playlists (such as Spotify's "New Music
46 This was because Sony keeps a larger share of the recording revenues, as compared to publishing
   revenues. See Sony/Mubadala/EMI, footnote 99.
47 See Sony/Mubadala/EMI, recitals 204-2011.
                                                   16
 ---pagebreak---           Friday") of streaming services than what the strength of the represented
          catalogue would justify. As playlists enable labels and publishers to push their
          repertoire to consumers, the concern is that the Transaction would enable Sony
          to get a disproportional share of promotion through playlists, to the detriment of
          its competitors.48
(77)      Finally, for the sake of completeness, the Commission looked at potential
          coordinated effects, even if the Commission considers that there is no reason
          whatsoever to expect the Transaction to give rise to coordinated effects concerns
          in the licensing of online rights in the EEA, and no third parties ever raised the
          issue.
6.1.2. Notifying Party's view
6.1.2.1. The Transaction will not affect the size or quality of the repertoire licensed by
        Sony/ATV nor its market share in music publishing.
(78)      The Notifying Party argues that Sony has exercised joint control over EMI MP
          and Sony/ATV has administered EMI MP’s catalogue and licensed it
          exclusively since 2012, so the Transaction will not affect the size or quality of
          the portfolio of music rights that Sony/ATV licenses today. As a practical
          matter, since 2012 EMI MP has had no independent Artists and Repertoire
          ("A&R"),49 creative, or operational personnel, and maintains only a skeleton
          team of dedicated personnel whose principal function is to oversee the interests
          of EMI MP and its investors.
(79)      Therefore the Transaction does not involve any increment in market shares, and
          the combined EEA market share of Sony/ATV and EMI MP of online revenues
          is below 30 %, namely [around 25]%.
6.1.2.2. The hold up theory postulated in Universal/BMG is not applicable.
(80)      The Notifying Party notes that the Commission's theory of harm in
          Universal/BMG postulates a hold-up scenario, in which publishers with a large
          repertoire exercise pressure on online music platforms and impose higher rates
          by threatening not to license their repertoire. In the Notifying Party's view, this
          premise is inconsistent with publishers' incentives because publishers are under
          pressure to license their repertoire as widely as possible due to a number of
          constraints.50
(81)      First, the ability to maximize licensing revenues as widely as possible is a
          central element of competition for authors. Any failure to license publishing
          rights for online dissemination would adversely affect a publisher’s competitive
          position and their ability to retain existing authors and compete for new talent.
          Not licensing important DSPs would result in significant losses for publishers and
          authors. And a “hold-up” strategy would not be rational with respect to smaller
48  See Minutes of the meeting with Impala of 30 August 2018, Final Impala submission of 25 July 2018,
    and Impala supplementary submission of 15 October 2018.
49 Artists and repertoire (A&R) is the division of a music publishing company (or recorded music
    company) with responsibility for talent scouting and overseeing the artistic and commercial
    development of authors. It also acts as a liaison between authors and the music publishing company.
50 Form CO, chapter 6, paragraphs 7.10 – 7.15.
                                                          17
 ---pagebreak---          DSPs, because it would not lead to any material financial advantage and would go
         against the interest music publishers have in ensuring that downstream competition
         between DSPs is as effective as possible. 51
(82)     Second, right holders and platforms remain under pressure from piracy.
         According to the Notifying Party, the success of online streaming in (partially)
         combatting unauthorized use of music is evidence of the disciplining effect piracy
         has in licensing negotiations, and the pressure to make authorized music readily
         available. The risk of piracy is particularly pronounced where music is only made
         available on a limited number of DSPs, as would be the case in any hypothetical
         “hold-up”. Music companies therefore face a constant pressure to license their
         music broadly (and resist both exclusives and “hold-ups”). 52
(83)     Third, online platforms enjoy significant buyer power which is inconsistent with
         the hold up theory.53 Since the Commission’s review of the Sony/Sony-ATV case in
         2016, DSPs have continued to become more powerful as online revenues have
         assumed still greater significance for music companies and DSPs have continued to
         consolidate. Accordingly, as explained below, the largest platforms enjoy
         significant buyer power, while music publishers have a strong incentive to
         encourage the growth of the smaller platforms.
(84)     Music companies rely on DSPs for the largest part of their revenues. Around […]%
         of Sony/ATV’s and EMI MP’s total 2017 music publishing revenues (and around
         […]% of Sony Music’s total 2017 recorded music revenues) were generated from
         DSPs. These revenues are predominantly generated through the larger DSPs. The
         three largest DSPs (Spotify, Google and Apple) represented c. […]% of
         Sony/ATV’s and EMI MP’s online licensing revenues.54
(85)     Any “hold-up” of rights would directly and immediately impact music
         companies’ principal source of revenue; they would sacrifice those revenues for
         the company’s entire catalogue (for instance, a “hold-up” of rights for three
         months would mean the loss of one-quarter of a year’s revenues). It is highly
         unlikely that revenues foregone could be recouped. On the other hand, many
         platform operators, including both large and smaller platforms, are active in other
         areas and use music in large part as a means of promoting other areas of their
         business (e.g., Apple, Amazon, Facebook, and Google). Online music is therefore
         not an essential element for these platforms, which can credibly threaten to walk
         away—or (continue to) operate on an unlicensed basis55—if the terms proposed by
         a publisher during contractual renegotiations are unacceptable to them.56
(86)     At the same time, the Notifying Party claims that music companies have a
         strong incentive to encourage competition among DSPs and to nurture entry
         from, and the growth of, smaller DSPs, so as to foster the continued growth of
         online distribution revenues and to avoid becoming dependent on only a handful
         of DSPs. They would have very little to gain by negotiating higher royalties
         from smaller DSPs (since they generate relatively little traffic and revenue),
51 Form CO, chapter 6, paragraphs 7.16 – 7.21.
52 Form CO, chapter 6, paragraphs 7.22 – 7.24.
53 Form CO, chapter 6, paragraphs 7.25 – 7.57.
54 Form CO, chapter 6, paragraph 7.26.
55 [Information on Sony/ATV’s licensing practices].
56 Form CO, chapter 6, paragraphs 7.27 – 7.28.
                                                    18
 ---pagebreak---            while in doing so would undermine these platforms’ competitiveness against
           larger rivals, impeding the development of the online music industry on which
           music companies increasingly rely.57
(87)       In addition, the Notifying Party claims that online platforms would not suffer
           much from a hold-up strategy, as they can and do launch their services without
           clearing music publishing rights. Typically, online platforms approach recorded
           music companies for a licence and, once they have cleared the recorded music
           rights, seek to launch their services as soon as possible. Platforms may then seek
           to regularize their position vis-à-vis music publishers retroactively. The
           Notifying Party lists a number of digital platforms [examples of digital
           platforms that operated for an initial period without a music publishing license
           in the past]. 58
(88)       [Information on Sony/ATV’s licensing practices].
6.1.2.3. Sony would not have the ability and incentive to hold-up rights to the benefit of
         the recorded music division and to the detriment of publishing rights
(89)       The Notifying Party explains that if the concern is that Sony would leverage
           across recording and publishing rights to negotiate joint agreements that would
           be to the benefit of both music publishing and recorded music revenues, Sony
           would already have had an incentive to do this. Mubadala would also have had
           no reason to object to any such strategy, since it would have resulted in better
           commercial terms for EMI MP’s repertoire. Any “leveraging” to the benefit of
           both sets of rights (and thus to both authors and artists) would therefore be
           possible today. The Notifying Party claims that the Transaction will not change
           anything in this regard.59
(90)       If instead, the concern is that Sony would sacrifice music publishing revenues
           for the benefit of increased recorded music revenues, the Notifying Party claims
           that Sony would have neither the ability nor the incentive to engage in such a
           strategy.60
(91)       First, any attempt to engage in a “hold-up” of recorded music and music
           publishing rights to the detriment of Sony/ATV’s and EMI MP’s authors would
           be subject to a veto from the collecting societies, which control the Anglo-
           American online performance rights that are licensed together with the matching
           mechanical rights (controlled and supplied by Sony/ATV and EMI MP) licensed
           by Sony/ATV.61 Their interest lies in maximising revenues from performance
57  Form CO, chapter 6, paragraphs 7.29 – 7.35.
58  [Information on Sony/ATV’s licensing practices].
59 See Form CO, chapter 6, paragraph 7.79.
60 See Form CO, chapter 6, paragraph 7.79.
61 The pan European licensing of Sony/ATV’s and EMI MP’s Anglo-American repertoire comprises
    both the mechanical rights (controlled and supplied by Sony/ATV and EMI MP) and the matching
    performance rights (controlled and supplied by the relevant national collecting societies through
    SOLAR). The licences are administered by SOLAR, a multi-territorial licensing vehicle, which is a
    wholly owned subsidiary of PRS and GEMA (the UK and German collecting societies) and
    administered by ICE (a wholly owned subsidiary of PRS, GEMA and STIM (Swedish collecting
    society). While Sony/ATV and EMI MP (along with other publishers) have withdrawn their Anglo-
    American mechanical rights from collecting societies, national collecting societies control Anglo-
    American online performance rights. These collecting societies can (and would) exercise a veto right
                                                      19
 ---pagebreak---            rights but also indirectly from mechanical rights, as authors are also direct
           members of performance right societies. Thus, they would oppose any attempt
           by Sony to shift value from publishing to recorded music, and they have veto
           authority, which means that Sony lacks any ability to do this.62
(92)       Second, any increase in revenues from recording rights to the detriment of music
           publishing rights would be to the detriment of most of Sony/ATV’s and EMI
           MP’s authors, as […]% of Sony/ATV and EMI MP’s authors are singer-
           songwriters that have recorded music contracts with Sony Music. Acting
           contrary to the interests of a large portion of its talent base would ruin Sony’s
           reputation with its authors and/or artists, rendering Sony uncompetitive against
           other music companies and destroying the value of its business, as well as
           exposing Sony/ATV to potential claims from affected authors in relation to any
           damage they may have suffered, undermining Sony/ATV’s ability to compete
           for new talent.
(93)       Third, in any event, there are practical complications that inhibit the joint
           negotiation of music publishing and recorded music rights. In Sony/ATV’s
           experience, DSPs do not typically approach recorded music and music
           publishing companies for licences to their repertoire at the same point in time or
           (even) seek to negotiate publishing licences for different geographic regions at
           the same time. Recorded music and music publishing negotiations are taking
           place at different times and the length, signature, and expiry dates of their
           respective agreements vary considerably. It would be difficult to re-align the
           contractual timings of publishing and recording rights.
6.1.2.4. Combined control shares are too low to raise concerns
(94)       In any event, even assuming that the Transaction will enable Sony to leverage
           across all of its rights to increase its bargaining power, the Notifying Party
           argues that the combined control shares are too low to raise concerns. More
           specifically, even if the Commission were to rely on “control shares” that combined
           rights of Sony Music, Sony/ATV and EMI MP, the resulting combined “control
           shares” would be below 50%. This would be too low to raise competition concerns
           even when compared to the control share level, at which in its previous decisions,
           the Commission identified competition concerns.63
    over any music publishing agreement negotiated by Sony/ATV that did not represent the best interests
    of the collecting societies’ authors. See Form CO, chapter 6, paragraph 7.73.
62 See further submission by Sony of 12 October 2018, to confirm the explanations provided by
    Sony/ATV on a conference call held on 11 October 2018.
63 By their nature, control shares add up to much more than 100 % because often several publishers hold
    fractional publishing rights over the same song and the recording rights and publishing rights over a
    song are often controlled by different integrated companies. As a result, in Universal/BMG, the
    Commission considered in a cautious approach "that the merger would have a significant impact in
    those markets where the merged entity would reach or exceed a control share of 50%". See
    Universal/BMG, recital 305. In Sony/Mubadala/EMI, the Commission found that "[t]he only countries
    in which the Parties' control share would exceed 50% would be the UK and Ireland". See
    Sony/Mubadala/EMI, recital 198. In Sony/Sony-ATV, the Commission found that as it considered the
    relevant market to be EEA wide, "the control shares remain below 50 % and therefore does not give
    rise to competition concerns even when aggregating the repertoires of each of Sony/ATV, EMI MP and
    Sony Music". See Sony/Sony-ATV, recital 142.
                                                        20
 ---pagebreak--- 6.1.2.5. The Transaction will not increase Sony's ability to influence DSP playlists
(95)     The Notifying Party argues that the Transaction will have no effect on Sony
         Music’s and Sony/ATV’s efforts to promote music publishing and recorded
         music repertoire on DSP playlists.
(96)     First, the incentive of Sony Music and Sony/ATV to promote their repertoire for
         inclusion on DSP playlists will be unchanged by the Transaction. In particular,
         Sony/ATV has every incentive to promote its own authors today, and
         Mubadala’s interest is exactly the same. 64
(97)     Second, it is unclear how Sony Music and Sony/ATV could coordinate their
         promotional activities as regards the majority of their respective catalogue. In
         promoting Sony/ATV authors, Sony/ATV necessarily promotes songs released
         by rival recorded music companies. Correspondingly, in promoting Sony Music
         artists, Sony Music necessarily promotes songs composed by writers signed to
         rival music. It would therefore be difficult for Sony, first, to devise a successful
         way to coordinate in the promotion of Sony/ATV & EMI MP and Sony Music
         respective repertoires, and, second, any such attempt would damage each Sony
         company’s relationships with the great majority of authors and artists who were
         not signed to both companies. Only with respect to music in which Sony Music
         holds the recorded music rights and Sony/ATV/EMI MP hold the music
         publishing rights, could Sony Music and Sony/ATV coordinate their
         promotional activities. However, even with respect to those songs, the
         Transaction will not change Sony's incentive and ability to coordinate across
         Sony Music and Sony/ATV/EMI MP, as for these songs Mubadala's interest is
         already aligned with Sony Music's interest.65
(98)     Third, the Notifying Party argues that, even if Sony Music and Sony/ATV were
         to combine their efforts after the Transaction, there is no reason why a single
         interlocutor representing both companies would be better able to influence DSP
         editorial teams than separate teams can today. In particular, the Notifying Party
         argues that there is no relationship between control share or market share and
         the ability to influence a given DSP's playlists. In fact, Sony estimates that it
         recorded or distributed [information on the representation of Sony Music tracks
         on DSP playlists]. For example, in the U.K. version of Spotify’s “New Music
         Friday” playlist, which is an important promotional platform with over 2.5
         million followers, on September 7, 2018, independent labels accounted for [30-
         40]% of the playlist’s tracks [information on the representation of Sony Music
         tracks on DSP playlists].
(99)     Finally, irrespective of the Transaction, music companies do not seem to have
         the ability, at least contractually, to influence playlist placement since DSPs’
         editorial teams are free to include whatever repertoire they want, and make their
         own decisions. [Information on the licensing terms of Sony/ATV and Sony
         Music]. Instead, interactions between music companies and DSPs with regard to
64  Form CO, chapter 6, paragraph 7.100.
65  Form CO, chapter 6, paragraph 7.97.
                                                 21
 ---pagebreak---           playlists are rather a form of “lobbying” through which a music company seeks
                                               66
          to influence playlist selection.
6.1.3. Commission's assessment
(100)     The Commission agrees with the Notifying Party's argument that the
          Transaction will not affect the size or quality of the repertoire licensed by
          Sony/ATV nor its market share in music publishing.
(101)     However, as explained above, the Transaction may have the potential to enable
          Sony to leverage its publishing rights of both Sony/ATV and EMI MP together
          with its recorded music rights (Sony Music) to increase its bargaining power
          vis-à-vis DSPs, to the extent that it would involve sacrificing music publishing
          revenues to achieve higher revenues in recorded music, and overall.
6.1.3.1. Applicability of the hold-up theory
(102)     In Universal/BMG, the Commission developed a “hold up” theory to assess the
          bargaining power of music publishers over online music platforms. This theory
          postulates what is in effect a “hold-up” scenario in which publishers with a large
          repertoire may exercise “pressure” on online music platforms and “impose
          higher rates” by threatening to withhold licensing rights, potentially across the
          recorded music and music publishing rights held under single ownership by an
          “integrated” music company.67
(103)     In Sony/Sony-ATV, the Commission considered that the pressure from piracy or
          alleged buyer power would not be sufficiently constraining for publishers not to
          engage in a hold-up strategy.
(104)     The Commission considers that there are not compelling reasons to depart from
          this view.68
(105)     That said, by way of background, the Commission notes the following.
(106)     First, online platforms and all competitors responding to the market
          investigation indicated that negotiations for publishing and recording rights are
          conducted separately.69
(107)     Second, Sony claims that, to date, it never coordinated its negotiations of
          recorded music and music publishing licences,70 which is also not disputed by
          online platforms responding to the market investigation. A majority of online
          platforms responding to the market investigation even noted that Sony would
          not leverage its publishing rights of both Sony/ATV and EMI MP together with
          its recorded music rights to extract better terms from them.71 This, in turn,
          indicates that Sony, up until today, even if it could already leverage recorded
66  Form CO, chapter 6, paragraphs 7.90, 7.93, 7.94 and 7.100.
67  Universal/BMG, paragraph 251.
68  Sony/Sony-ATV, paragraphs 110-111
69  See replies to Questionnaire to online customers, question 21; and to Questionnaire to competitors,
    question 23.
70  See for instance Form CO, Chapter 6, paragraph 7.66.
71  See replies to Questionnaire to online customers, question 29
                                                        22
 ---pagebreak---            and publishing rights to extract better terms both on the recording and the
           publishing side (since Mubadala would have had no reasons to oppose such a
           strategy), it has not done so.
(108)      However, as explained, theoretically the Transaction may enable Sony to
           sacrifice music publishing revenues to achieve higher revenues in recorded
           music, and overall. This merger specific concern is assessed in the next section.
6.1.3.2. Applicability of the merger specific concern that Sony would sacrifice music
         publishing revenues to achieve higher revenues in recorded music
(109)      The Commission considers it very unlikely that Sony would engage in a strategy
           of leveraging recorded music and music publishing rights to extract overall
           better terms from DSPs to the detriment of music publishing revenues.
(110)      First, as regards Sony's ability to engage in such strategy, the Notifying Party
           argued that Sony would not have the ability to engage in such strategy as any
           attempt to engage in a “hold-up” of recorded music and music publishing rights
           to the detriment of Sony/ATV’s and EMI MP’s authors would be subject to a
           veto from the collecting societies. The market investigation indicated the
           following:
                   –       An overwhelming majority of collecting societies responding to the
                           market investigation confirmed that Sony/ATV (directly or through
                           SOLAR)72 negotiates licensing agreements with DSPs covering the
                           Anglo-American mechanical rights controlled by Sony/ATV and
                           EMI MP, together with the corresponding Anglo-American
                           performance rights controlled/administered by collecting
                           societies.73 Dissemination of online content involves both an act of
                           reproduction and an act of making available and, therefore,
                           implicates both mechanical rights (i.e. the rights to make copies of
                           the protected work) and performance rights (i.e. the rights to make
                           the protected work available or to communicate it to the public).
72  SOLAR is a multi-territorial licensing vehicle, wholly owned by PRS (the U.K. collecting society) and
    GEMA (the German collecting society). Sony/ATV appointed SOLAR to administer its and EMI MP's
    mechanical rights for the online dissemination of Anglo-American repertoire. [Information on
    Sony/ATV’s licensing strategy.] See Form CO, chapter 6, paragraph 6.17.
73 See replies to Questionnaire Q3 to collecting societies, question 7.
    In particular, PRS for Music explains that "Sony/ATV and EMI MP have both mandated SOLAR to
    provide copyright administration services in respect of licensing agreements which Sony/ATV
    negotiates with DSPs to include (i) the AA mechanical rights controlled by Sony/ATV and EMI MP,
    and (ii) the matching AA [Anglo-American] performing rights controlled/administered by the AA
    CMOs [Collective Management Organisations, i.e. collecting societies]. The licensing of both the
    mechanical rights and the performing rights by Sony/ATV through SOLAR allows the DSP to agree a
    licence for the whole of the relevant musical work (by which we mean the composition) for the DSP’s
    service through one licence. The AA performance rights are brought to SOLAR by PRS and GEMA
    by means of the agreements which PRS and GEMA have with the other AA collecting societies.
    IMRO, the Irish Music Rights Organisation, explains that "SOLAR currently obtain the IMRO
    performing rights from PRS whom, pursuant to an agreement between IMRO and PRS, can sub-
    licence IMRO rights to other Option 3 special purpose vehicles provided that these SPVs comply with
    the terms of the IMRO/PRS agreement and on the basis that PRS remains liable to IMRO for all
    activities of any-sub agent"
                                                        23
 ---pagebreak---                  –       An overwhelming majority of collecting societies responding to the
                         market investigation confirmed that SOLAR requires prior
                         approval from the Anglo-American collecting societies to include
                         their rights in the licence.74
                 –       The two European collecting societies controlling Anglo-American
                         performance rights, IMRO (the Irish collecting society) and PRS
                         for Music (the UK collecting society), confirmed that they have to
                         approve the music publishing rights licensing agreement over the
                         Anglo-American repertoire between Sony/ATV and DSPs, and that
                         they could and would veto the inclusion of their members’
                         performing rights in such licence, if they considered that their
                         members would be disadvantaged.75
                 –       That said, at least theoretically, Sony/ATV would still be free to
                         license its relevant mechanical rights on a standalone basis.76
(111)    The Commission therefore considers that collecting societies would not allow
         Sony to reduce the value of the performing rights. They would also most likely
         oppose any attempt by Sony to reduce the value of mechanical rights, as this
         would prejudice the interests of Sony/ATV's and EMI MP's authors, who are
         also direct members of collecting societies. However, the only threat is that they
         would withdraw their members’ performing rights from the licencing
         agreement. Sony/ATV would still at least theoretically be free to license its
         relevant mechanical rights on a standalone basis. The DSPs would then have to
         negotiate licenses for performance rights with national collecting societies.
         Hence, the Commission considers that Sony would have at least the technical
         ability to engage in such strategy.
(112)    The next question is therefore whether Sony would have the incentive to do so.
(113)    As regards Sony's incentive to engage in such strategy, the Commission
         considers it very unlikely that Sony would have the incentive to engage in a
         strategy of leveraging recorded music and music publishing rights to extract
         overall better terms from DSPs but that would be to the detriment of music
         publishing revenues.
(114)    Firstly, the Commission considers that the threat that performing societies would
         withdraw their members’ performing rights from the licencing agreement may
         not be sufficient to discipline Sony. The Commission considered whether this
         threat (1) would be sufficiently credible and (2) would act as a sufficient
         deterrent so that Sony would not have the incentive to engage in such a strategy
         and risk having to licence its mechanical rights on a standalone basis. The
         market investigation suggests that the threat is credible, since respondents to the
         market investigation indicated that, in the past, collecting societies have used
         their control over performance rights to veto licensing agreements for online
         rights or influence the negotiations.77 However, responses to the market
74 See replies to Questionnaire Q3 to collecting societies, question 8.
75 See replies to Questionnaire Q3 to collecting societies, questions 9-11.
76 See replies to Questionnaire Q3 to collecting societies, questions 9-11.
77 See replies to Questionnaire Q2 to online customers (platforms), question 28
                                                        24
 ---pagebreak---          investigation are not conclusive as regards the question whether this threat of
         veto would act as a sufficient deterrent.78
(115)    Secondly, the Commission considers that the damaging impact such strategy
         would have on Sony's music publishing business would be such that Sony would
         not have the incentive to engage in such strategy. As explained by the Notifying
         Party, any increase in revenues from recording rights to the detriment of music
         publishing rights would be to the detriment of most of Sony/ATV’s and EMI
         MP’s authors. The Commission considers that the dissatisfaction of authors who
         sign a contract with Sony/ATV & EMI MP to get publishing services and the
         threat of losing them would have a disciplining effect on Sony:
                 –       Sony/ATV estimates that […]% of its composer agreements come
                         up for renewal each year. The Commission considers that the threat
                         of these authors not renewing is credible as once the contract has
                         come to an end there is no barrier to switching, and any “hold-up”
                         or reduction of royalty rates would be evident to Sony/ATV’s and
                         EMI MP’s authors. Just for the remainder of 2018 and 2019, the
                         following authors' contracts are up for renewal and could therefore
                         be lost by Sony/ATV: [details of Sony/ATV’s author contracts].79
                 –       For ongoing contracts, the Commission considers that there would
                         be a credible threat that authors would successfully seek
                         termination of their contracts and potentially claim damages for
                         breach of Sony's contractual obligation to maximise the value of
                         their publishing rights. [Information on the terms of Sony/ATV’s
                         contracts with authors]. Under common law legal systems
                         (including those in the U.K. and U.S.), any “hold-up” or reduction
                         of royalty rates would almost certainly be claimed to be a
                         repudiatory breach of contract by a significant number of
                         Sony/ATV’s and EMI MP’s authors, who would seek to
                         immediately terminate their contracts and seek damages.80
                 –       The Commission also considers that such strategy would
                         significantly jeopardise Sony/ATV’s ability to sign (and retain)
                         new talents, which are fundamental to the long-term success of a
                         music publisher. Sony/ATV seeks to sign [a significant number] of
                         authors each year. By way of example, in the U.K. alone
                         Sony/ATV and EMI MP have signed […] authors this year, and
                         signed an average of […] new authors each year over the last five
                         years. Recruiting and retaining talent is unpredictable (the revenues
                         generated by new authors can be modest in the early years), but
                         fundamental to the long-term success of a music publisher. As
                         Sony/ATV does not know the identity of “the next Ed Sheeran”
                         (who Sony/ATV signed before he achieved commercial success), it
                         is vital that the business continues to sign and retain a wide variety
                         of talented authors to maximise its chances of success. Any
                         withdrawal of repertoire from DSPs or reduction in royalty rates
78 See replies to Questionnaire Q1to competitors, questions 28-30
79 See Notifying Party's reply to the Commission's information request of 4 October 2018, paragraph 1.3
80 See Notifying Party's reply to the Commission's information request of 4 October 2018, paragraph 1.3
                                                      25
 ---pagebreak---                          achieved for digital exploitation in order to benefit Sony Music
                         would seriously harm Sony/ATV’s reputation (further exacerbated
                         through the loss of established talent), jeopardising Sony/TAV’s
                         ability to sign (and retain) new talent, thereby threatening the
                         future of its business.81
(116)    The results of the market investigation support the idea that authors would react
         negatively to such strategy. All DSPs expressing a view on the question replied
         that the authors would react negatively. Deezer for instance considered that
         "[t]he authors would likely react negatively and organize against the company /
         strategy". Similarly, all competitors expressing a view on the question replied
         that authors would react negatively and potentially try to terminate the contracts.
         For instance, Kobalt Music Group indicated that "[w]e do not sacrifice
         publishing rates/advances for better rates/advances on our master catalogue. If
         we did and they understood this writers would be rightly outraged". Actually,
         the general view of competitors is that they would certainly not engage in a
         strategy that would sacrifice value for authors to the benefit of recorded rights.82
(117)    The threat of authors switching is particularly significant given the level of
         competition in the upstream market for the provision of publishing services to
         authors. As explained further in section 6.2, Sony/ATV and EMI MP's
         combined share of revenue was only [20-30]% in 2017 at the EEA level and in
         any event below 30% in all Member States.
(118)    The Notifying Party provided evidence that […] authors have actually switched
         to competitors in the recent past, although Sony/ATV never attempted to
         devalue their publishing rights to extract better terms for the recording rights.
         Since June 2012, successful bids by rival music publishers allowed them to sign
         [a number of] authors and catalogues formerly signed to Sony/ATV and EMI
         MP. For instance, Sony/ATV and EMI MP lost [examples of authors formerly
         signed with Sony/ATV or EMI MP].83
(119)    Thirdly, all DSPs and integrated music companies responding to the market
         investigation confirmed that they have never been involved in licencing
         agreements where the integrated music company agreed less favourable terms
         regarding music publishing rights of Anglo-American repertoire, in exchange
         for better terms on recording rights.84 Even those respondents to the market
         investigation, which acknowledge that a coordinated approach across recorded
         music and music publishing is possible, consider that the purpose of such
         strategy would be to maximise revenues for both sides and that authors would
         react negatively to a strategy exclusively aimed at increasing revenues on the
         recorded music side to the detriment of music publishing.85
81 See Notifying Party's reply to the Commission's information request of 4 October 2018, paragraph 1.3
82 See replies to Questionnaire Q2 to online customers (platforms), question 26.3; and Q1 to competitors,
   question 28.3
83 See Annex 1(1) to the Form CO
84 See replies to Questionnaire Q2 to online customers (platforms), question 26.4; and Q1 to competitors,
   question 28.4
85 See reply of a respondent to Questionnaire Q1 to competitors, question 28.3
                                                      26
 ---pagebreak--- (120)    Overall therefore, the Commission considers that, post Transaction, Sony will
         not have the incentive to coordinate the negotiations of its recorded and
         publishing rights to extract better terms for its recorded music division to the
         detriment of its music publishing business. As this is the only merger specific
         way in which the Transaction could have increased the bargaining power of
         Sony, the Commission considers that the Transaction will not increase the
         bargaining power of Sony vis-à-vis DSPs. However, for the sake of
         completeness, in the next section, the Commission will analyse the increase in
         Sony's control shares caused by the addition of EMI MP's Anglo-American
         repertoire to the combined control shares of Sony/ATV and Sony Music.
6.1.3.3. Analysis of control shares
(121)    In previous cases (Universal/BMG, Sony/Mubadala/EMI and Sony/Sony-ATV),
         to assess the bargaining power of music companies vis-à-vis DSPs, the
         Commission calculated so-called "control shares" (see recital (49) for a
         definition). This was based on the idea that music publishers with only fractional
         interests in the same musical work all wield a negative veto power towards that
         work.
(122)    Since 2007 all the major music publishers have withdrawn the online
         mechanical rights to their Anglo-American repertoire from the traditional
         collecting society system and retained the right to license the mechanical rights
         to Anglo-American repertoire directly to users. Therefore, they have the power
         to control pricing and licensing terms with regard to the Anglo-American
         repertoire. On the other hand, mechanical rights for the Continental catalogue
         (as well as performance rights for Anglo-American and Continental repertoires)
         remain under control of the collecting societies. Therefore the control share of
         Sony/ATV for instance is the share of all songs made available for streaming or
         downloading (irrespective of whether these songs belong to the Anglo-American
         repertoire or the Continental European one) in which Sony/ATV has fractional
         or full publishing rights and that belong to its Anglo-American repertoire.
(123)    Sony controls the rights over three sets of catalogues: (1) the music publishing
         rights of Sony/ATV; (2) the music publishing right of EMI MP (jointly with
         Mubadala so far), and (3) the recording music rights of Sony Music.
(124)    Following the removal of Mubadala, and assuming (contrary to the conclusion
         of the previous section) that the Transaction will enable and incentivise Sony to
         coordinate the negotiations of its recorded and publishing rights to extract better
         terms for its recorded music division to the detriment of its music publishing
         business, it would be appropriate to calculate control shares across Sony's
         recorded music and music publishing rights.
(125)    Accordingly, the increase in Sony's bargaining power vis-à-vis DSPs could be
         analysed by calculating the increase in Sony's control shares caused by the
         addition of EMI MP's Anglo-American repertoire to the combined catalogue of
         Sony/ATV and Sony Music, as following the Sony/Sony-ATV transaction, the
         Commission considered that Sony would already be able to leverage across
         Sony/ATV and Sony Music.
(126)    In Sony/Sony-ATV and Sony/Mubadala/EMI, control shares were measured on
         the basis of the number of titles in the weekly top 100 singles chart hits in which
                                                 27
 ---pagebreak---           a publisher or a record label had any ownership right (whether recording or
          publishing, fractional or full). For the publishing rights, only the Anglo-
          American titles were included in the control shares. The weekly digital charts
          were consolidated over the entire year to generate a list of unique songs that
          appeared in the chart during that year ("weekly chart unweighted control share"
          methodology). This means that each song was only counted once, even if it
          appeared in the chart for many weeks.
(127)     While disputing the control share theory, the Notifying Party nevertheless
          submitted weekly chart control share data calculated following the methodology
          used in Sony/Sony-ATV and Sony/Mubadala/EMI (the "weekly chart unweighted
          control share" methodology), with some improvements to address comments
          from third parties.86 In particular:
        (a)      For each EEA country with the exception of Cyprus, Liechtenstein,
                 Luxembourg, and Malta,87 Sony identified the relevant weekly charts.
                 Where possible, Sony relied on the official weekly digital sales charts that
                 provide the largest coverage of tracks. However, not all EEA countries
                 have official digital charts, and certain official charts include only a
                 limited number of tracks. In these situations, Sony identified the most
                 reliable “unofficial” chart.
        (b)      Sony consolidated the weekly charts to generate a list of unique tracks that
                 appeared in the charts during 2017 for each country.
        (c)      For each chart track that appears in these lists, Sony determined whether
                 authors on Sony/ATV's and EMI MP’s roster were involved in writing the
                 track, and therefore whether the track is part of their publishing repertoire.
                 All works that were written or co-written by Sony/ATV's and EMI MP's
                 authors were included, i.e. track with both full and fractional ownership
                 rights were included. Finally, for all tracks that were considered part of
                 Sony/ATV's or EMI MP's repertoire, it was determined whether the track
                 belongs to the Anglo-American or Continental European repertoire.88
                 Only the Anglo-American titles were included in the control shares of
                 Sony/ATV and EMI MP.
        (d)      Control shares that take into account recorded music rights were also
                 computed in a similar way as publishing control shares. Sony included all
                 tracks where the recorded rights are held by Sony Music in a given year,
                 as well as third-party songs distributed by Sony Music, irrespective of
86 See submission of 20 July 2018 by Warner Group CORP. (WMG) following the meeting with the case
   team of 29 June 2018; and Impala submission of 25 July 2018.
87 These are countries where it has not been practicable to generate data. These countries account for
   […]% of Sony’s EEA music publishing revenues, so would not have a material effect on the EEA-
   wide data.
88 The same track may be considered Anglo-American and Continental European in the event that the
   track is co-authored by two (or more) authors registered with collecting societies in different countries.
   Specifically, one (or more) authors may be registered with the U.K. or U.S. collecting society. The
   work of that author is therefore considered Anglo-American. Similarly, one (or more) authors may be
   registered with a collecting society in Europe. The work of that author is therefore considered
   Continental European. Sony adopted a conservative approach and treated these tracks as Anglo-
   American.
                                                       28
 ---pagebreak---                 whether the track is considered Anglo-American or Continental European
                repertoire by Sony Music.
       (e)      The “control shares” are expressed in percentage terms of the number of
                unique tracks that enter into each respective chart year. This ensures that
                the “control shares” are comparable across EEA countries. There is no
                official EEA chart, so EEA “control shares” were generated by weighting
                the national shares according to total music publishing and recorded music
                market sizes.
(128)    As compared to Sony/Sony-ATV and Sony/Mubadala/EMI, the following
         improvements were made following suggestions made by third parties:89
       (a)      More EEA countries were added to the analysis.
       (b)      Third-party songs distributed by Sony Music were included in Sony
                Music's control share.
       (c)      EEA “control shares” were generated by weighting the national shares
                according to not only total music publishing but also recorded music
                market sizes.
(129)    Table 2 below presents the EEA-wide control shares of Sony/ATV, EMI MP,
         and Sony Music on a standalone basis, as well as the combined position that
         Sony could achieve pre-Transaction and post-Transaction, assuming (contrary to
         the conclusion in the previous section) that the Transaction will enable and
         incentivise Sony to coordinate the negotiations of all of its recorded and
         publishing rights. In particular:
                –       The combined control share of Sony/ATV and EMI MP reflects the
                        fact that following Sony/Mubadala/EMI, the Commission
                        considered that Sony would be able to negotiate with DSPs by
                        leveraging across both of its music publishing catalogues
                        (Sony/ATV and EMI MP);
                –       The combined control share of Sony/ATV and Sony Music reflects
                        the fact that following Sony/Sony-ATV, the Commission considered
                        that Sony would be able to also leverage across Sony/ATV and
                        Sony Music, because as a result of the transaction Sony/ATV
                        became fully controlled by Sony, as was Sony Music already,
                        making it possible to adopt a strategy maximising combined
                        profits.
                –       The combined control share of Sony/ATV, EMI MP and Sony
                        Music reflects the assumption that post-Transaction (contrary to
                        the conclusion reached in the previous section) Sony would
                        coordinate the negotiations of all of its recorded and publishing
                        rights.
89 See submission of 20 July 2018 by Warner Group CORP. (WMG) following the meeting with the case
   team of 29 June 2018; and Impala submission of 25 July 2018.
                                                    29
 ---pagebreak---                 Table 2: 2017 weekly chart control shares at the EEA level
                                                                                           Sony/ATV,
                                               Sony/ATV                      Sony/ATV
                                                                                                Sony
                                                 & EMI            Sony        & Sony
                  Sony/ATV        EMI MP                                                     Music &
                                                   MP            Music         Music
                                                                                             EMI MP
                                               Combined                      Combined
                                                                                            Combined
Weekly chart
unweighted         [20-30]%       [20-30]%      [30-40]%       [20-30]%      [30-40]%        [40-50]%
control share
 Note: Combined control shares are lower than the sum of control shares because of the
 songs for which more than one division controls rights
 (130)    As explained in the previous section, the Commission considers that the
          Transaction will not incentivise Sony to coordinate the negotiations of its
          recorded and publishing rights to extract better terms from DSPs. Therefore,
          controls share should not be calculated by adding EMI MP's Anglo-American
          repertoire to the combined catalogue under control of Sony/ATV and Sony
          Music, i.e. control shares should not be calculated across Sony/ATV, Sony
          Music & EMI MP. However, even if the Commission assumed (which is not the
          case) that the appropriate combined control share of Sony included the rights to
          Sony Music, Sony/ATV and EMI MP repertoires, the resulting EEA-wide
          combined control share would be [40-50]%.
 (131)    This is below the 50% threshold, which was set in precedents as the threshold
          for significant market power and thus competition concerns.90 Control shares
          should not be equated to market shares. By their nature, control shares add up to
          more than 100 % because often several publishers hold fractional publishing
          rights over the same song and the recording rights and publishing rights over a
          song are often controlled by different integrated companies. As a result, in
          Universal/BMG the Commission considered that the threshold for increased
          market power that would have a significant (negative) impact on competition is
          a control share of 50%.91 This threshold was confirmed in Sony/Mubadala/EMI
          and in Sony/Sony-ATV.92
 (132)    As a sign that the threshold of 50% is reasonable it is worth noting that other
          major publishers also have very significant control shares. Although the
          Commission does not have recent control share estimates for Universal Music,
          based on its decision in Universal Music Group/EMI Music and despite the
          divestment of significant catalogues back then, Universal Music's current
          control share at an EEA level across music publishing and recording is
          estimated to be between 40% and 50%.93
 90  See Universal/BMG, recital 305; Sony/Mubadala/EMI, recital 198; and Sony/Sony-ATV, recital 142.
 91  Universal/BMG, recital 305.
 92 Sony/Mubadala/EMI, recital 198; and Sony/Sony-ATV, recital 142.
 93 Case COMP/M.6458 Universal Music Group/EMI Music. Commission decision of 21 Septmber 2012
     ("Universal/EMI").
                                                    30
 ---pagebreak--- (133)     Furthermore, the 50% threshold has to be considered in the light of the
          important developments in the music industry over the last ten years. Online
          music in Europe (and worldwide) has experienced significant and sustained
          growth in recent years due to the increasing popularity of streaming, a trend that
          is set to continue. Just between 2012 and 2017, the EEA market for online music
          publishing rights increased fivefold (from circa €[…] million in 2012 to more
          than €[…] million in 2017). Given these developments, a 50% control share
          today is unlikely to provide as much bargaining power to a publisher than a 50%
          control share back in 2007 for the following reasons.
(134)     Firstly, the growth of online music and in particular streaming services has
          lowered barriers to entry and expansion for publishers. The proliferation of
          streaming means that major record labels and publishers no longer hold the gate-
          keeping role they did by virtue of their influence over offline formats such as
          radio and physical music stores.94 As a result, authors and artists are more
          willing to explore signing with smaller record labels and music publishers. This
          increased competition has resulted in advances to successful authors being at an
          all-time high, narrowing royalty splits in authors’ favour, shorter contract terms
          and retention periods, and an increased prevalence of publishing contracts
          without retention periods.95 Against this background, a hold-up strategy
          whereby a publisher would threaten not to license the rights to the repertoire it
          controls becomes less credible, as the threat of unsatisfied authors switching has
          become much more credible, especially in the context of a strategy (as the one
          that is the focus of the control share analysis in this section) that would involve
          sacrificing publishing revenues to the benefit of recording revenues.
(135)     Secondly, DSPs today have much more buyer power than they used to have 5-
          10 years ago. Today, music companies rely on DSPs for the largest part of their
          revenues. This was not the case 5 years ago, and even less 10 years ago. In
          2017, around […]% of Sony/ATV’s and EMI MP’s total 2017 music publishing
          revenues and around […]% of Sony Music’s total 2017 recorded music revenues
          were generated from DSPs. Spotify, Apple, and Google/YouTube accounted for
          more than […]% of Sony/ATV and EMI MP's EEA online licensing revenues in
          2017.96
(136)     As regards the methodology used to calculate control shares, third parties
          claimed that in addition to the improvements presented above and made to the
          control share calculation methodology, the control share calculation should also
          take into account the greater control that comes from having rights in songs that
94 For instance, Willard Ahdritz, CEO, Kobalt Music stated: "Because of the proliferation of streaming,
   fans have unprecedented access to their artists of all shapes and sizes. Instead of gatekeepers deciding
   what fans should listen to, now the fans drive what they want to listen to". See
   https://www kobaltmusic.com/blog/why-independent-artists-are-ruling-the-music-industry-according-
   to-willard-ahdritz
95 See Form CO, chapter 6, paragraph 7.19 and Chapter 1, paragraph 6.13.
96 See Form CO, chapter 6, paragraphs 7.25-7.26. The Notifying Party also claims that music publishers
   have strong incentives to encourage the growth of smaller DSPs and therefore not to insist on higher
   royalties from them as compared to the Spotify, Apple or Google/Youtube. This is because smaller
   DSPs can grow consumption and explore new methods of commercialising music (as exemplified by
   Spotify which launched its streaming service 10 years ago and which is now number one), and in any
   event increasing royalty rates for smaller DSPs would not allow them to grow and even possibly
   survive, as the largest DSPs currently operate at loss or very low margins. See Form CO, chapter 6,
   paragraphs 7.29-7.35
                                                       31
 ---pagebreak---          maintain high chart positions over multiple weeks. In particular, they claimed that
         songs should be weighted according to the number of weeks they stay in the
         chart.97
(137)    In the same logic, it is reasonable to expect that the popularity of songs also
         matters to assess the strength of a particular repertoire. A sensible measure
         which both takes into account the (instantaneous) popularity of a song and its
         longevity would be the share that the songs controlled by a music company
         account for in the total number of streams on a DSP platform, covering as many
         songs as possible.
(138)    The Commission considers that such measure better captures the bargaining
         power of a music publisher than the measure proposed by third parties (see
         recital (136) above) which continues to focus on the Top 100 charts and which
         only weights songs based on the number of weeks it remains in the weekly
         charts.
(139)    Firstly, in line with its precedents, the Commission considers that larger samples
         are preferable because they proxy better the actual control share of Sony, i.e. the
         share of the songs in DSPs' entire repertoires that Sony controls. In Sony/Sony-
         ATV, the Commission recognised that control shares in weekly charts are only a
         "proxy" for actual control shares and that "[i]n principle, to calculate control
         shares it would be necessary to determine the controlling entities for all the
         titles". This is confirmed by the results of the market investigation. Customers
         responding to the market investigation considered in particular that the chart
         based measure is too "hit-centric" and that a better method would be to use
         "each digital music service’s usage data". 98 The alternative measure proposed
         by the Commission would be based on DSP's usage data.
(140)    Secondly, a stream-weighted control share methodology does not only take into
         account the greater control and bargaining power that comes from having rights
         in songs that are listened to over an extended period (the number of weeks they
         remain in the charts), but also the greater control and bargaining power that
         comes from having rights in a very popular song which everyone wants to listen
         to.
(141)    The Commission therefore asked the Notifying Party to produce such measure.
(142)    Notwithstanding its reservations about the “control share theory”, the Notifying
         Party nevertheless submitted control share data based on DSP usage data. These
         data assess Sony’s recorded music and music publishing rights across the top
         75,000 most streamed songs on [a DSP]. The Commission considers that [the
         DSP in question] is representative of the overall online market for the following
         reasons. First, [information on the representativeness of the sample]. Second,
         [information on the representativeness of the sample].99 And third, there is no
         reason to believe that Sony's control share would differ materially depending on
97 See submission of 20 July 2018 by Warner Group CORP. (WMG) following the meeting with the case
   team of 29 June 2018; and Impala submission of 25 July 2018.
98 See Replies to questionnaire Q2 to online customers, question 32.1.
99 See Form CO, chapter 6, recital 7.26.
                                                      32
 ---pagebreak---         whether we look at streams on [names of several DSPs]. [Information on the
        representativeness of the sample].
(143)   Control shares calculated using this DSP usage data covers a much broader
        selection of songs than the chart data-based “control shares” considered above.
        Sony has used the following methodology to generate “stream-weighted control
        shares" for the […] EEA countries in which Sony/ATV and EMI MP directly
        license their repertoire, together accounting for [the vast majority] of
        Sony/ATV's EEA music publishing revenues:
      (a)      For each of the […] EEA countries, Sony obtained the 75,000 most
               streamed songs on [a DSP] for each month of the first quarter of 2017.
               [Details of how Sony sourced the sample in question].
      (b)      These data identify Anglo-American repertoire tracks for which an author
               of Sony/ATV or of EMI MP was involved in writing the track, regardless
               of the publishing share held (i.e., tracks with full and fractional rights were
               included). Only the Anglo-American titles were included in the control
               shares of Sony/ATV and EMI MP.
      (c)      Control shares that take into account recorded music rights were also
               computed in a similar way as publishing control shares. Sony included all
               tracks where the recorded rights are held by Sony Music in a given year,
               as well as third-party songs distributed by Sony Music, irrespective of
               whether the track is considered Anglo-American or Continental European
               repertoire by Sony Music. [Information on the identification of recorded
               music rights in the sample].
      (d)      Sony consolidated these monthly data to obtain a unique list of songs for
               each country for the first quarter of 2017.
      (e)      Each track in the sample was then weighted by the number of streams
               during that period.
      (f)      The “control shares” are expressed in percentage terms of the number of
               unique tracks that enter into each country DSP streaming dataset. This
               ensures that the “control shares” are comparable across EEA countries.
               The EEA “control shares” across these […] territories were generated by
               weighting the national shares according to total music publishing and
               recorded music market sizes.
(144)   Table 3 below presents the EEA-wide "stream-weighted control shares" for the
        first quarter of 2017 of Sony/ATV, EMI MP, and Sony Music on a standalone
        basis, as well as the combined control share of Sony/ATV and EMI MP, the
        combined control share of Sony/ATV and Sony Music, and the combined
        control share of Sony/ATV, EMI MP and Sony Music.
                                                 33
 ---pagebreak---      Table 3: Q1 2017 Stream-weighted control shares on [a DSP] at the EEA level
                                                                                            Sony/ATV,
                                                 Sony/ATV                     Sony/ATV
                                                                                               Sony
                                                   & EMI          Sony         & Sony
                   Sony/ATV        EMI MP                                                    Music &
                                                     MP           Music         Music
                                                                                             EMI MP
                                                 Combined                     Combined
                                                                                            Combined
Stream-
weighted           [20-30]%       [10-20]%       [30-40]%      [30-40]%       [40-50]%      [40-50]%
Control share
 Note: Combined control shares are lower than the sum of control shares because of the
 songs for which more than one division controls rights.
 (145)     Even if the Commission assumed (which is not the case) that the appropriate
           combined control share of Sony included the rights to Sony Music, Sony/ A TV
           and EMI MP repertoires, under this improved stream-weighted control share
           methodology, the resulting EEA-wide combined control share of Sony would be
           [40-50]%. This is still below the 50 % threshold which was set in the precedents
           identified in paragraphs (93) and (130).
 (146)     For completeness, the Commission notes that Impala also submitted to the
           Commission weekly chart control shares estimates for the UK, Ireland, France,
           Spain, the Netherlands, Sweden and Italy. The methodology used by Impala was
           to take one chart from each month of 2017 for each territory. Impala then
           averaged the weekly control shares over the 12 months. This methodology
           therefore takes into account the number of weeks songs remain in the charts.100
 (147)     In line with the Commission's precedents, Impala only included the Anglo-
           American titles in the control shares of Sony/ATV and EMI MP, whereas for the
           control share of Sony Music it included all tracks where the recorded rights are
           held by Sony Music irrespective of whether the track belongs to the Anglo-
           American or Continental European repertoire. To take into account third-party
           songs distributed by Sony Music, Impala added a net increase of control shares
           for distributed repertoire of 2%. However, instead of calculating the combined
           control share of Sony/ATV, EMI MP and Sony Music as the share of the songs
           controlled jointly by these entities over the entire chart list, Impala restricted the
           scope of the denominator to only Anglo-American repertoire plus the songs of
           the Continental European repertoire controlled by Sony Music. 101
 (148)     This methodology is inconsistent with the methodology used in the
           Commission's previous decisions where "[t]he weekly digital charts were
           consolidated to generate a list of unique tracks" and "“control shares” [were]
           expressed in percentage terms of the number of unique tracks that entered into
           each respective chart".102 Hence, in previous decisions, the denominator clearly
           included all songs from the charts, not only Anglo-American repertoire plus the
           songs of the Continental European repertoire controlled by Sony Music.
 100 See Impala's submissions of 9 October 2018, 10 October 2018, 15 October 2018 and 16 October 2018.
 101 See Impala's submissions of 9 October 2018, 10 October 2018, 15 October 2018 and 16 October 2018.
 102 See Sony/Sony-ATV, paragraph 138
                                                      34
 ---pagebreak--- (149)     Moreover, this measure does not proxy the bargaining power of Sony vis-à-vis
          DSPs (even assuming – wrongly (see previous section) – that Sony would
          leverage across recording and publishing). This is because a music publishing
          company's bargaining power vis-à-vis DSPs and therefore its market power
          depends on how critical its catalogue of songs is for DSPs when compared to the
          overall set of songs the DSPs aim to get access to irrespective of whether these
          songs belong to the Anglo-American repertoire or the Continental European
          one.
(150)     It is easy to see this by considering a hypothetical country where Anglo-
          American songs are not popular. Assuming for instance that in that hypothetical
          country only 1 song of the top 100 chart belongs to the Anglo-American
          repertoire, and Sony/ATV or EMI MP holds full or fractional publishing rights
          over that song, then Impala's control share methodology would give a 100%
          control share to Sony (both pre- and post-Transaction), even if Sony Music does
          not hold any other rights over the 99 other songs part of the top 100 chart. This
          does not appropriately proxy the bargaining power of Sony, as effectively Sony
          would only be able to threaten the DSPs to withdraw its rights in relation to 1%
          of its entire repertoire (assuming the chart is representative of the DSPs' entire
          repertoire). In this hypothetical scenario, the Commission would not consider
          even a 100% control share following Impala's methodology as potentially
          raising competition concerns.
(151)     The Commission also notes that the control shares estimates submitted by
          Impala were estimated at a national level, whereas as explained above the
          relevant geographic market for the exploitation of publishing rights for online
          use is EEA-wide.
(152)     The Commission therefore considers that Impala's control share submission, as
          it does not measure correctly the bargaining power of Sony, does not cast doubts
          on the validity of the control share analysis carried out by the Commission and
          presented above.
6.1.3.4. The effect of the Transaction on Sony's ability to influence DSP playlists
(153)     The Commission considers that contrary to Impala's claim, the Transaction will
          not enable Sony to achieve a disproportional share of promotion through
          playlists, in a way that would foreclose competition in the market for the
          exploitation of publishing rights for online use.103
(154)     First, the Commission considers that, as claimed by the Notifying Party,
          irrespective of the Transaction, music companies seem to have limited ability to
          influence playlist placement. No music publisher or online platform questioned
          by the Commission in its market investigation disputes this claim.104
(155)     Second, assuming that the Transaction would enable Sony Music and
          Sony/ATV to coordinate their promotional activities in a way that was not
103 See Minutes of the meeting with Impala of 30 August 2018, Final Impala submission of 25 July 2018,
    and Impala supplementary submission of 15 October 2018.
104 See Universal Music Group's response to questions received from the European Commission on 31
    August 2018 in respect of the Sony/EMI transaction, as well as replies to Questionnaire Q2 to online
    customers (platforms) and to Questionnaire Q1 to competitors.
                                                      35
 ---pagebreak---           possible before the Transaction (e.g. because in promoting Sony Music artists,
          Sony Music necessarily promotes songs composed by writers signed to rival
          music publishing companies, i.e. to the detriment of Mubadala), the
          Commission does not see why a single interlocutor representing both companies
          would be better able to influence DSP editorial teams than separate teams can
          today.
(156)     In particular, licencing agreements do not contain any requirements as regards
          playlist placements. Therefore a hold-up scenario, by which publishers with a
          large repertoire would threaten not to license their repertoire in order to obtain a
          more prominent placement on playlists, is not conceivable.
(157)     In this respect, only two market participants – Impala and Warner – claimed that
          a music company with a greater control share is able to get its songs more
          prominently positioned in the important playlists of streaming services than
          what the strength of the represented catalogue would justify. None of them has
          been able to provide even anecdotal evidence supporting this claim.105 In
          contrast, the Notifying Party submitted some anecdotal evidence in support of
          its claim showing that [information on the representation of Sony Music tracks
          on DSP playlists] and the independents over-represented in one of Spotify’s
          most important curated playlists.106
(158)     Finally, even if the Transaction increased the ability of Sony to lobby for more
          prominent placements on DSPs playlists, the Commission considers that this
          would not have significant foreclosure effects. To the extent that music
          companies can influence at all the songs that are available on a given DSP’s
          playlist, such influence is limited to curated playlists that are prepared by DSPs'
          editorial team.
(159)     Other playlists are prepared by industry stakeholders and users, by algorithms,
          independently based on charts for instance, or even self-selecting, all without the
          involvement of music companies.
6.1.3.5. Coordinated effects
(160)     In both Universal/BMG and Sony/Mubadala/EMI, the Commission excluded
          coordinated effects concerns in the online licensing of music publishing rights,
          inter alia, on the ground that it was unlikely that prices were sufficiently
          transparent for music publishers to be able to reach terms of coordination,
          monitor compliance with them and detect any deviation.107
(161)     At the outset, the Commission notes that the Transaction will have no effect on
          whatever scope for tacit coordination, as Sony/ATV already negotiates online
          licences on behalf of EMI MP, and has done so since 2012.
(162)     For completeness, the Commission considers that, in any event, the Transaction
          could not raise coordinated effects concerns in the EEA market for the licensing
105 See Minutes of the meeting with Impala of 30 August 2018, Warner Music Group (WMG)’s response
    to RFI dated 31 August 2018.
106 See Form CO, chapter 6, paragraph 7.98.
107 Universal/BMG, paragraph 87 and Sony/Mubadala/EMI, paragraph 267.
                                                    36
 ---pagebreak---          of online music publishing rights because the market is not conducive to
         collusion, for the following reasons.
(163)    First, coordinated effects concerns in relation to the licensing of Continental
         European repertoire can be excluded, since music publishers have no influence
         over the price of this repertoire.
(164)    Second, as to the negotiation of online licenses for Anglo-American repertoire,
         there is insufficient transparency in pricing to support tacit coordination as
         pricing and other contractual terms are negotiated confidentially.
(165)    Third, the publishing industry is not concentrated given the presence of
         hundreds of publishers active in this industry. Given the large number of
         publishers, any attempt at coordination would inevitably leave a large group of
         outsiders that would undermine any such attempt.
(166)    Fourth, there has been significant new entry and expansion over recent years
         (including the entry and rapid growth of BMG, Kobalt, Concord, Round Hill
         Music, and others). As publishers enter and compete to sign authors in the
         upstream market, they create new works available for online licensing and
         thereby destabilise any possible attempt at coordination.
(167)    Fifth, there exists no plausible retaliatory mechanism that could deter deviation.
         And even if a mechanism existed, since licence agreements for Anglo-American
         repertoire are negotiated bilaterally and feature differing durations and
         commencement dates, coordinating firms would need to wait until their own
         agreements with DSPs had expired before retaliating on price or other
         commercial terms. Any tacit understanding could not, therefore, be policed by
         timely or effective retaliation, and would be internally unstable.
(168)    Sixth, any attempt at coordination would be frustrated by external pressures,
         including the countervailing bargaining power of DSPs such as Apple, Amazon,
         and Spotify.
(169)    Finally, any attempt by integrated music companies to coordinate across their
         recorded music and music publishing businesses would be even more difficult
         due to the considerable difficulties in coordinating licensing terms between their
         respective recorded music and music publishing businesses, the absence of
         transparency in respect of the terms on which recorded music and music
         publishing terms are licensed, and the lack of any credible retaliation
         mechanism.
6.1.3.6. Conclusion
(170)    For the above reasons, the Commission concludes that the Transaction does not
         raise serious doubts as to its compatibility with the internal market as regards the
         market for the exploitation of publishing rights for online use.
(171)    Finally, given the absence of effects on this market, the Commission also
         dismisses IMPALA's concerns according to which if Sony were to be able to
         increase its revenues downstream it would then be able to offer better terms for
         artists, while the opposite would happen to the independents.
                                                  37
 ---pagebreak--- 6.2.     Horizontal effects on other markets
         Publishing services to authors
(172)     In Sony/Mubadala/EMI, the Commission identified no concerns arising from the
          combination of Sony/ATV and EMI MP, including because of competition from
          other publishers on royalties, advances, contract terms, and retention periods.108
          In Sony/Sony-ATV, the Commission reached the same conclusion noting that
          since then, competition had remained intense.109
(173)     The Commission considers that the Transaction will have no effect on the
          market for the provision of publishing services to authors. While Sony/ATV and
          EMI MP are active in this market, the Transaction will not increase Sony's
          market share which remains unaffected by the Transaction. Since 2012
          Sony/ATV has administered EMI MP’s catalogue under an Administration
          Agreement, managing relationships with EMI MP's existing authors and signing
          agreements for new authors whose rights are co-owned by Sony/ATV and EMI
          MP. Sony/ATV and EMI MP have not competed to sign new authors since
          2012.
(174)     The Commission further notes that, in any event, Sony/ATV and EMI MP's
          combined market share by revenue was [20-30]% in 2017 EEA-wide and was
          below 20% in France, Italy, Bulgaria, Estonia, Hungary, Latvia, Lithuania and
          Luxembourg. In the other EEA countries, the combined market share of the
          Parties did not exceed 25% in Austria, Belgium, Cyprus, Iceland, Ireland, Malta,
          the Netherlands, Poland, Romania, Slovakia, Spain and Sweden. The Parties'
          combined market share was between 25% and 30% in the Czech Republic,
          Denmark, Germany, Greece, Norway, Portugal, Slovenia, and the United
          Kingdom.
(175)     During the market investigation certain publishers claimed that the Transaction
          may harm authors and weaken competitors.110 According to such complaints,
          post-merger, Sony would become financially more powerful and therefore be
          able to offer artists larger advances than its competitors, reducing competition in
          the market. Sony would also be able to obtain better terms for offline and online
          exploitation and therefore have a stronger position to persuade writers to sign to
          Sony for publishing services. Sony could, according to complainants, also
          leverage recording and publishing rights and persuade authors to sign for both. It
          was also claimed that the quality of services offered to authors suffers as Sony's
          repertoire increases and Sony does not exploit the rights of all authors as before,
          while authors cannot leave their publisher. In turn, associations of authors and
          composers claimed that post-merger, the quality of services provided to authors
          will deteriorate as the merged entity will merge two vast catalogues and creative
          teams and focus on the most valuable rights (i.e. the Anglo-American
          repertoire). They also claimed that Sony will use its market size in the allocation
          of promotional opportunities by DSPs to promote a small roster of artists, at the
          expense of cultural diversity and consumer choice, and make it more difficult
          for independent publishers to compete for such opportunities. Moreover, a
108  Sony/Mubadala/EMI, recital 294.
109  Sony/Sony-ATV, paragraphs 147 and 148.
110 See Questionnaire Q1 to competitors, question 42.1 and 43.
                                                       38
 ---pagebreak---            complainant asked the Commission to carry out a “cultural diversity impact
           assessment,” arguing that the Transaction would reduce the number of authors
           on Sony/ATV’s roster and that Sony is more likely to focus on Anglo-American
           authors and artists. Finally, Impala also claimed that if Sony were to be able to
           offer better terms for artists it would dynamically increase its revenues
           downstream and that, also, the market for providing publishing services to
           authors is influenced by the ability of a publisher to secure better terms for
           exploitation and more opportunities for an author’s works.111
(176)      These claims are addressed in the following paragraphs.
(177)      As to the claim that post-merger, Sony would become financially more powerful
           and therefore be able to offer artists larger advances than its competitors, the
           Commission recalls that Sony/ATV and EMI MP have not competed to sign
           new authors since 2012. Moreover, publishers compete for successful authors on
           all commercial terms of a publishing contract (including not only advances, but
           also royalty splits and retention periods, but also the type of attention and
           commitment offered to an author). Publishers offer different “mixes” of
           percentage rates and advances to attract authors. An author will consider the
           overall package when deciding among rival publishers. The Notifying Party has
           provided the example of Kobalt's, which had success by providing favourable
           percentage splits to authors.112 In addition, if anything, if Sony were able to
           offer better deals to authors, this would be good for authors and for competition,
           unless and until it is demonstrated that this may result in other types of anti-
           competitive effects.
(178)      As to the claim that the Transaction could potentially increase Sony's incentives
           to tie or bundle music publishing services with recorded music services to
           singer-songwriters, the Commission notes that, following the Transaction, Sony
           will benefit 100% of increments in profits of EMI MP when signing a new
           author (compared to previously when part of the profit increment would have
           had to be shared with Mubadala). However, the Commission considers, first,
           that a tying or bundling strategy would not foreclose competitors, as the vast
           majority of tracks are not recorded by the authors of the song. A large pool of
           common customers is normally required for foreclosure to be a potential
           concern.113 Any hypothetical tying or bundling strategy could thus only arise in
           respect of the singer-songwriter sub-set of artists and authors, leaving the majority
           of demand available for rivals. Second, post-Transaction tying or bundling is
           unlikely to be a profitable strategy, as singer-songwriters generally prefer
           signing recording rights and publishing rights with different companies, 114 and
111 Impala's claim that if Sony were to be able to increase its revenues downstream it would then be able
    to offer better terms for artists is also addressed in each of the sections of this Decision dealing with
    the downstream markets, i.e. mechanical rights, performance rights, synchronization rights and print
    rights.
112 Form CO, Chapter 1, para. 6.18. Authors receive royalties (split in the agreed proportions between the
    author and publisher) and publishers compete to offer authors more favourable percentage royalty
    splits. The lower the percentage of royalties paid to (or retained by) the publisher, the more attractive
    that offer will appear to the author (other things being equal).
113 Non-Horizontal Guidelines, paragraph 100.
114 Only a small minority of authors signed to Sony/ATV have signed recorded music contracts with Sony
    Music. Sony/ATV manages the works of approximately […] authors, the majority of which are not
    singer-songwriters. Sony/ATV estimates that only around […]% of its and EMI MP’s authors have
    recording contracts with Sony Music. Singer-songwriters who have a publishing agreement with
                                                          39
 ---pagebreak---            therefore singer-songwriters would rather switch to one of the many rival music
           companies.
(179)      As to the claim that the quality of services offered to authors would suffer, the
           Commission notes that the Transaction will have no effect on A&R115
           expenditure, as EMI MP is already commercially integrated with Sony/ATV and
           the companies’ A&R teams were combined in 2012. Moreover, even if the
           Transaction did lead Sony/ATV to reduce A&R, this could potentially benefit
           competing music publishers (whether majors or independents), as they would be
           better able to compete for and sign any authors neglected by Sony. Moreover,
           there is no reason to believe that large music publishing companies have less
           incentive to maximize revenues than smaller companies. The ability to
           maximize licensing revenues is a central element of competition among music
           companies for authors. Therefore, Sony will have every incentive to extract
           maximum value from its authors' work, since any failure to licence publishing
           rights would impair its ability to retain existing authors and compete for new
           talent.
(180)      Authors indeed can and do switch between music publishers. The Commission
           notes that typical contracts with authors appear to have a duration of no more
           than five years (sometimes with an option to extend). There is also a trend
           towards shorter retention periods (i.e., the period during which a publisher
           typically retains ownership in copyrighted work authored by a writer after the
           writer has left) in response to increasing competition among music publishers
           (including from Kobalt which applies a “no lock-in” policy, which requires no
           commitment that authors’ repertoire remain with the publisher116). Exclusivity
           periods during which authors commit to deliver new repertoire to a single music
           publisher have been reduced to 1-3 years. Likewise, contract retention periods
           during which a music publisher may exploit an authors’ repertoire have been
           also reduced to 1-3 years. In the past, it was relatively common for an author to
           agree retention periods for the duration of the copyright in the work (70 years
           after the death of the author). While it is still possible to enter contracts on this
           basis in France, Germany, and Italy, their incidence is declining. In Spain,
           Scandinavia, and Benelux, contract periods are typically three to five years in
           duration with retention periods of five to twenty years. In France the situation is
           similar, and it is unlawful to enter into a publishing contract of longer than five
           years’ duration. In Germany, a writer can terminate after five years even if the
           publisher has not recouped any advances paid to the author.117 In the U.K.,
           Sony/ATV typically enters into contracts of [information on duration of
    Sony/ATV, but have signed recording contracts with recorded music companies other than Sony
    Music include: [examples of singer-songwriters signed to Sony/ATV but not Sony Music]. Examples
    of singer-songwriters who are signed to Sony/ATV (for music publishing) and Sony Music (under
    recording contracts) include: [examples of singer-songwriters signed to Sony Music and Sony/ATV].
115 Artists and repertoire (A&R) is the division of a music publishing company (or recorded music
    company) with responsibility for talent scouting and overseeing the artistic and commercial
    development of authors. It also acts as a liaison between authors and the music publishing company.
116 See, e.g., “Kobalt Capital Raises $600m Fund To Spend On Buying Music Copyrights,” Music
    Business Worldwide, November 6, 2017, citing Kobalt Founder and CEO Willard Ahdritz (“This is a
    beautiful thing: our clients can leave our platform if they don’t like us … With Kobalt, no-one is locked
    in”).
117 The collecting society will nevertheless continue to pay royalties to the publisher in these
    circumstances until the account is recouped.
                                                          40
 ---pagebreak---             Sony/ATV author contracts] years’ duration plus retention periods from
            [information on duration of Sony/ATV author retention periods] years post-
            termination. Consequently, authors are readily able to switch between publishers
            both in relation to new works (which are not already subject to a retention
            period with another publisher) and, to an increasing extent, for older songs for
            which the retention period has expired. As a result, there is strong and regular
            competition for successful authors on all commercial terms of a publishing
            contract (including advances, royalty splits, and retention periods). This
            competition has strengthened since 2016, with narrowing royalty splits in
            authors’ favour, shorter contract terms and retention periods, and an increased
            prevalence of publishing contracts without retention periods.
(181)       As to the alleged impact on consumer choice and cultural diversity, there is no
            reason to assume that Sony has become (or will become more) biased towards
            Anglo-American repertoire118 or will reduce the size of its roster119 (although
            such a reduction would benefit Sony’s competitors and result in a reduced
            “control share”). Further, since EMI MP is already commercially integrated with
            Sony/ATV, neither is there any reason to expect the Transaction to have any
            impact on the size or composition of Sony/ATV’s roster. Finally, as to the
            request to carry out a “cultural diversity impact assessment,” in
            Sony/Mubadala/EMI Music Publishing the Commission considered that as a
            result of its possible negative impact on competition, that transaction could also
            negatively impact cultural diversity.120 Given that the present Transaction does
            not raise concerns as to the level of consumer choice, the Commission also
            considers that the Transaction does not raise concerns as to cultural diversity.
(182)       Further, the Commission notes that during the market investigation, authors
            have expressed a neutral view on the Transaction as they do not believe that the
            Transaction will change anything for their business or the quality of the services
            provided by Sony to them. 121
(183)       Finally, given the absence of effects on the market for publishing services to
            authors, the Commission also dismisses IMPALA's concerns, according to
            which if Sony were to be able to offer better terms for artists it would
            dynamically increase its revenues downstream. Similarly, due to the absence of
            effects in the downstream market for the licensing of online rights, the
            Commission also does not consider that the Transaction would increase Sony’s
            ability to attract artists in the upstream A&R market.
(184)       In regard to coordinated effects, at the outset, the Commission recalls that the
            Transaction will have no effect on the market for the provision of publishing
            services to authors as the Transaction will not increase Sony's market share
            which remains unaffected by the Transaction. For completeness, the
118 Sony/ATV has spent almost EUR […] million in 2017 on developing non-Anglo-American talent in the
     EEA (Sony submission of 4 September 2018, paragraph 48).
119 [Description of EMI MP’s internal organisational structure, and of Sony’s future commercial strategy].
120 The Commission took cultural diversity into account in Sony/Mubadala/EMI Music Publishing, where
     it noted: “If end consumer choice for innovative, comprehensive and cheap online music services were
     to be reduced, this in turn would limit the number and breadth of music distribution channels that are
     available to competing music publishers. This ultimately reduces consumer choice for music and
     cultural diversity” (paragraph 240).
121 See Questionnaire Q4 to authors / composers, questions 2 and 3.
                                                         41
 ---pagebreak---           Commission notes that nothing suggests that coordinated effects are possible in
          relation to the supply of publishing services to authors. The Commission's
          investigation in Sony/Mubadala/EMI did not find "any significant impediment to
          effective competition stemming from coordinated effects in the market for
          publishing services to authors" (recital 134), this conclusion was no different in
          Sony/Sony-ATV and the investigation of the present case does not invalidate this
          conclusion. First, contracts with authors are negotiated bilaterally and are
          confidential. There is therefore no transparency as to the “pricing” or other
          terms agreed between authors and publishers. Second, publishers are in
          competition to win new author contracts, and a single song by a single author
          might generate more royalties than the catalogues of several other authors
          combined. There is therefore no obvious basis on how publishers might tacitly
          collude over the authors that they sign, nor any obvious “punishment”
          mechanism by which a tacit co-ordination could be sustained. The incentives to
          compete for new authors would therefore destabilize any putative co-ordination.
          Third, new publishers competing to sign new authors would undermine any
          putative ability for established players to reach a tacit understanding that would
          facilitate market-sharing. Fourth, there exists no plausible retaliatory mechanism
          that might sustain any tacit understanding in relation to the provision of
          publishing services to authors. Finally, in any event, in addition to the “major”
          music publishing companies, there are a large number of other publishers who
          would be able to undermine any coordination between them, including
          significant players like Kobalt, Concord, and Peermusic, as well as hundreds of
          smaller publishers.
        Mechanical rights
(185)     In Sony/Mubadala/EMI, the Commission excluded competition concerns on this
          market because “control over pricing and licensing terms [was] to a large
          extent in the hands of the collecting societies” and Sony/ATV had no plans to
          withdraw its offline rights from collecting societies.122 The Commission reached
          the same conclusion in Sony/Sony-ATV,123 and, as explained below, the situation
          has not changed in the meantime.
(186)     In 2017, Sony/ATV and EMI MP together accounted for around [20-30]% of
          revenues generated from licensing mechanical rights in the EEA (between [10-
          20]% and [30-40]% depending on the Member State). This share will be
          unaffected by the Transaction. Since 2012, Sony has exercised joint control over
          EMI MP and Sony/ATV has administered EMI MP’s catalogue under an
          Administration Agreement. Sony/ATV has had the sole and exclusive right to
          license EMI MP’s mechanical rights over that period. Accordingly, the
          Transaction will have no effect on the market for the licensing of mechanical
          rights.
(187)     Post-Transaction, Sony will continue to compete with a large number of other
          music publishers, including Universal, Warner/Chappell, BMG Rights
          Management, Kobalt, Concord, and Peermusic, as well as an array of smaller
          publishers and new entrants.
122 Sony/Mubadala/EMI, paragraph 100.
123 Sony/Sony-ATV, paragraph 149.
                                                 42
 ---pagebreak--- (188)     Some publishers claimed that publishers, such as Sony, can, on the one hand,
          withdraw their rights from the traditional collecting society system and, on the
          other hand, exert significant control from within the collective societies.
(189)     The Commission considers that those concerns can be dismissed for the
          following reasons.
(190)     Most music publishers indicated during the market investigation that, as
          publishers, they would not be able to obtain control over mechanical rights
          (Continental repertoire), which are licensed by the collecting societies and they
          cannot or have no interest in obtaining control over such rights. Furthermore,
          while publishers have indicated during the market investigation that they could
          obtain control over the offline licensing of mechanical rights (Anglo-American
          repertoire)(except Universal and BMG), and some publishers in fact already do
          have such control, most publishers indicated that they would have no interest in
          withdrawing the offline licensing of mechanical rights (Anglo-American
          repertoire) from the collecting societies. Only a few collecting societies
          indicated that music publishing companies have withdrawn the exploitation of
          offline rights from the colleting society.
(191)     With regard to publishers' influence over collecting societies' decisions, the
          Commission considers it unlikely that post-Transaction, Sony could gain
          control, whether formal or informal, over collecting societies in Europe.
(192)     The decisions of collecting societies are taken by their boards, which comprise
          representatives of rights holders. The market investigation confirmed that most
          societies grant only a limited share of the voting rights to Sony/ATV or EMI
          MP.124 Based on the Notifying Party's submission, in the majority of collecting
          societies, the number of seats open to publishers is limited to one-third of the
          total number of seats or less.125
(193)     Sony today exercises joint control over EMI MP, and Sony/ATV’s and EMI
          MP’s negotiations with and representation on the boards of collecting societies
          have, since 2012, been managed by Sony/ATV. Accordingly, there will be no
          change to Sony/ATV’s and EMI MP’s relationship with collecting societies
          post-Transaction. Based on the Notifying Party's submission and as confirmed
          by the market investigation, as a result of the Transaction, Sony/ATV will gain
          no more seats on any collecting society board.126
(194)     Furthermore, although it is technically possible to withdraw mechanical rights,
          based on the Notifying Party's submission, Sony has never contemplated doing
          so with respect to offline rights in Europe.
(195)     Furthermore, during the market investigation, collecting societies stated that the
          merged entity would have few or no voting rights in their boards, and will not
          gain additional voting rights post-Transaction. While a majority of collecting
          societies who replied to the market investigation consider that, if the publisher's
124 See Questionnaire Q3 to collecting societies, question 3.
125 Sony submission of 4 September 2018, paragraph 8.
126 See Questionnaire Q3 to collecting societies, question 3.1.
                                                         43
 ---pagebreak---            catalogue is large enough127, there exist other means through which that music
           publisher can influence their decisions (e.g. during the general assembly), not a
           single collecting society that replied to the market investigation has replied that
           post-Transaction Sony would be able to exert decisive influence over its
           decisions on offline publishing rights. 128
(196)      Therefore, as recognized by the Commission in Universal/BMG, in
           Sony/Mubadala/EMI Music Publishing, and most recently in Sony/Sony-ATV,
           the Commission concludes that publishers are not in a position to exert a
           decisive influence on the collecting societies’ decisions and Sony is therefore
           unable to influence collecting societies’ commercial terms.
(197)      Finally, given the absence of effects on the market for mechanical rights, the
           Commission also dismisses IMPALA's concerns according to which if Sony
           were to be able to increase its revenues downstream it would then be able to
           offer better terms for artists, while the opposite would happen to the
           independents.
(198)      In regard to coordinated effects, at the outset, the Commission recalls that the
           Transaction will have no effect on the market for mechanical rights as these are
           to a large extent in the hands of the collecting societies and the Transaction will
           not increase Sony's market share which remains unaffected by the Transaction.
           For completeness, the Commission notes that nothing suggests that coordinated
           effects are possible in relation to mechanical rights. First, given that publishers
           do not set prices there is no possibility of tacit co-ordination in relation to price.
           Second, there has been significant new entry and expansion over recent years
           (including BMG Rights Management, Kobalt, and Concord). As publishers
           enter and compete to sign new authors in the upstream market, they create new
           works that generate mechanical rights income, undermining any putative ability
           for established players to reach a tacit understanding that would facilitate
           market-sharing. Third, competition takes place in relation to individual songs
           and/or authors’ works, not on the basis of publishers’ repertoires as a whole.
           Because performing artists and their recorded music companies select individual
           songs for recording, publishers compete to have their authors’ songs recorded on
           an individual song basis. Fourth, there exists no plausible retaliatory mechanism
           that might sustain any tacit understanding in relation to the licensing of
           mechanical rights. Finally, in addition to the “major” music publishing
           companies, there are a large number of other publishers who would be able to
           undermine any co-ordination between them, including significant players,
           Kobalt, Concord, and Peermusic.
         Performance rights
(199)      In Sony/Mubadala/EMI, the Commission excluded competition concerns on this
           market because “control over pricing and licensing terms [was] to a large
           extent in the hands of the collecting societies” and Sony/ATV had no plans to
127 A majority of publishers have also replied that a publisher with a large enough repertoire is able to
     exert decisive influence on collecting societies' decisions, see Questionnaire Q1 to competitors,
     question 41. However, as noted, collecting societies themselves do not consider that post-Transaction
     Sony would be able to exert decisive influence over its decisions on offline publishing rights.
128 See Questionnaire Q3 to collecting societies, question 5.
                                                         44
 ---pagebreak---           withdraw its offline rights from collecting societies.129 The Commission reached
          the same conclusion in Sony/Sony-ATV,130 and, as explained below, the situation
          has not changed in the meantime.
(200)     The Parties' combined market shares in performing rights at an EEA-level in
          2017 are [20-30]% and between [10-20]% and [20-30]% depending on the
          Member State. The Transaction will not increase Sony's market share.
          Moreover, since 2012, Sony has exercised joint control over EMI MP and
          Sony/ATV has administered EMI MP’s catalogue under an administration
          agreement. Sony/ATV has had the sole and exclusive right to license EMI MP’s
          performance rights over that period.
(201)     Post-Transaction, Sony will continue to compete with a large number of other
          music publishers, including Universal, Warner/Chappell, BMG Rights
          Management, Kobalt, Concord, and Peermusic, as well as an array of smaller
          publishers and new entrants.
(202)     Furthermore, most music publishers indicated during the market investigation
          that, as publishers, they would not be able to obtain control over performance
          rights (be it Anglo-American repertoire or Continental repertoire) which are
          licensed by the collecting societies and they cannot or have no interest in
          obtaining control over such rights. Only a few collecting societies indicated that
          music publishing companies have withdrawn the exploitation of offline rights
          from the colleting society.
(203)     Finally, given the absence of effects on the market for performance rights, the
          Commission also dismisses IMPALA's concerns according to which if Sony
          were to be able to increase its revenues downstream it would then be able to
          offer better terms for artists, while the opposite would happen to the
          independents.
(204)     In regard to coordinated effects, at the outset, the Commission recalls that the
          Transaction will have no effect on the market for performance rights as these are
          to a large extent in the hands of the collecting societies and the Transaction will
          not increase Sony's market share which remains unaffected by the Transaction.
          For completeness, the Commission notes that nothing suggests that coordinated
          effects are possible in relation to performance rights. First, given that prices are
          determined by collecting societies, there is no possibility of tacit co-ordination
          in relation to price. Second, there has been significant new entry and expansion
          over recent years (including BMG Rights Management, Kobalt, and Concord).
          As publishers enter and compete to sign new authors in the upstream market,
          they create new works that generate performance rights income, undermining
          any putative ability for established players to reach a tacit understanding that
          would facilitate market-sharing. Third, there would be no ability to reach a tacit
          understanding facilitating market-sharing given the considerable complexity and
          volatility in the number of users exploiting performance rights in particular
          songs, which it would be impossible for publishers to discern. Licensees are
          numerous and widely spread. Authors and publishers’ revenues derive from the
          exploitation of their rights by users with whom they have no direct relationship.
129 Sony/Mubadala/EMI, paragraph 100.
130 Sony/Sony-ATV, paragraph 149.
                                                  45
 ---pagebreak---           For example, performance rights are exploited by a radio station playing a song
          or when a record is played in a restaurant. Fourth, there exists no plausible
          retaliatory mechanism that might sustain any tacit understanding in relation to
          the licensing of performance rights. Finally, in addition to the “major” music
          publishing companies, there are a large number of other publishers who would
          be able to undermine any co-ordination between them, including significant
          players, Kobalt, Concord, and Peermusic.
        Synchronisation rights
(205)     In Sony/Mubadala/EMI, the Commission excluded competition concerns in the
          licensing of synchronization rights, including because customer choice is
          typically driven by the choice of song, rather than the identity of the music
          publisher.131 The Commission reached the same conclusion in Sony/Sony-
          ATV,132 and, as explained below, the situation has not changed in the meantime.
(206)     The Parties' combined market shares at an EEA-level in 2017 are [20-30]% for
          synchronisation rights and between [10-20]% and [30-40]% depending on the
          Member State. The Transaction will not increase Sony's market share.
          Moreover, since 2012, Sony has exercised joint control over EMI MP and
          Sony/ATV has administered EMI MP’s catalogue under an administration
          agreement. Sony/ATV has had the sole and exclusive right to license EMI MP’s
          synchronization rights over that period. Accordingly, the Transaction will have
          no effect on the market for the licensing of synchronization rights.
(207)     Post-Transaction, Sony will continue to compete with a large number of other
          music publishers, including Universal, Warner/Chappell, BMG Rights
          Management, Kobalt, Concord, and Peermusic, as well as an array of smaller
          publishers and new entrants.
(208)     Given that these rights are typically licensed on a song-by-song basis, concerns
          can be excluded because customer choice is typically driven by the choice of
          song, rather than the identity of the music publisher, and many alternative
          publishers with a large choice of songs would remain post-transaction.
(209)     Finally, given the absence of effects on the market for synchronisation rights,
          the Commission also dismisses IMPALA's concerns according to which if Sony
          were to be able to increase its revenues downstream it would then be able to
          offer better terms for artists, while the opposite would happen to the
          independents.
(210)     In regard to coordinated effects, at the outset, the Commission recalls that the
          Transaction will have no effect on the market for synchronisation rights as the
          Transaction will not increase Sony's market share which remains unaffected by
          the Transaction. For completeness, the Commission notes that nothing suggests
          that coordinated effects are possible in relation to synchronization rights. First,
          synchronization rights are negotiated bilaterally and the terms of such contracts
          are not publicly available. There is therefore no transparency in relation to the
131 Sony/Mubadala/EMI, paragraph 126.
132 Sony/Sony-ATV, paragraph 153-154.
                                                 46
 ---pagebreak---            royalties charged for synchronization rights.133 Second, given that there are
           alternative sources of such rights and a variety of end-users, with each song
           being to a degree unique, it would be impossible to reach a tacit understanding
           between publishers to share customers. Third, there exists no plausible
           retaliatory mechanism that might sustain any tacit understanding in relation to
           synchronization rights. Finally, in any event, in addition to the “major” music
           publishing companies, there are a large number of other publishers who would
           be able to undermine any coordination between them, including significant
           players like Kobalt, Concord, and Peermusic.
         Print rights
(211)      In Sony/Mubadala/EMI, the Commission excluded competition concerns in the
           licensing of print rights, including because Sony would continue to face
           competition from rival music publishers.134 The Commission reached the same
           conclusion in Sony/Sony-ATV,135 and, as explained below, the situation has not
           changed in the meantime.
(212)      The Parties' combined market shares at an EEA-level in 2017 are [10-20]% for
           print rights and between [0-5]% and [20-30]% depending on the Member State.
           The Transaction will not increase Sony's market share. Moreover, since 2012,
           Sony has exercised joint control over EMI MP and Sony/ATV has administered
           EMI MP’s catalogue under an administration agreement. Sony/ATV has had the
           sole and exclusive right to license EMI MP’s print rights over that period.
(213)      Post-Transaction, Sony will continue to compete with a large number of other
           music publishers, including Universal, Warner/Chappell, BMG Rights
           Management, Kobalt, Concord, and Peermusic, as well as an array of smaller
           publishers and new entrants.
(214)      Finally, given the absence of effects on the market for print rights, the
           Commission also dismisses IMPALA's concerns according to which if Sony
           were to be able to increase its revenues downstream it would then be able to
           offer better terms for artists, while the opposite would happen to the
           independents.
(215)      In regard to coordinated effects, at the outset, the Commission recalls that the
           Transaction will have no effect on the market for print rights as the Transaction
           will not increase Sony's market share which remains unaffected by the
           Transaction. For completeness, the Commission notes that nothing suggests that
           coordinated effects are possible in relation to print rights. First, print rights are
           negotiated bilaterally between music publishers and print music publishers. The
           pricing terms for print rights are not transparent, as the terms of these contracts
           are confidential. As a result, music publishers are unable to monitor the prices
           charged by their rivals to print music publishers or other users. Second, revenues
           from print rights are derived from works of successful authors, and therefore
           from competition to sign successful authors in the upstream market. As already
           noted, there has been significant new entry and expansion in recent years
133 See also in this regard: Sony/Mubadala/EMI, paragraph 137 and Universal/BMG, paragraph 125.
134 Sony/Mubadala/EMI, paragraphs 103 and 110.
135 Sony/Sony-ATV, paragraph 155-156.
                                                       47
 ---pagebreak---           (including BMG Rights Management, Kobalt, Concord, and Peermusic),
          undermining any putative ability for established players to reach a tacit
          understanding that would facilitate market-sharing. Third, there exists no
          plausible retaliatory mechanism that might sustain any tacit understanding in
          relation to the licensing of print rights. Finally, in any event, in addition to the
          “major” music publishing companies, there are a large number of other
          publishers who would be able to undermine any coordination between them,
          including significant players like Kobalt, Concord, and Peermusic.
6.3.    Vertical relationships
(216)     Music publishing rights are licensed for use in a number of downstream markets
          where other companies of the Sony Group are present, including:
        (a)       recorded music, which involves licensing mechanical publishing rights;
        (b)       online music platforms, which involves licensing online rights136;
        (c)       motion picture production, which may involve licensing synchronization
                  rights;
        (d)       TV programme production, which may involve licensing synchronization
                  rights; and,
        (e)       videogame production, which may involve licensing synchronization
                  rights.
(217)     The Transaction may at least conceivably bring a change in these vertical
          relationships. Pre-Transaction Mubadala would not have allowed Sony to
          sacrifice revenues on the music publishing side in order to support the
          downstream business of Sony Group by foreclosing downstream rivals, whereas
          post-Transaction, if such strategy were to be profit maximising at a group level,
          this could be envisaged. Similarly, the incentive to engage in the foreclosure of
          upstream rivals may theoretically be increased due to the fact that profit
          increments upstream would no longer have to be split with Mubadala.
(218)     Where there are vertically affected markets, two possible forms of foreclosure
          arise. The first is where the merger is likely to raise the costs of downstream
          rivals by restricting their access to an important input (input foreclosure). The
          second is where the merger is likely to foreclose upstream rivals by restricting
          their access to a sufficient customer base (customer foreclosure).
(219)     During the market investigation, Impala claimed that Sony Group's interests in
          (i) the production, acquisition and distribution of feature films; (ii) the
          production and distribution of videogames; and (iii) the production and
          distribution of television programmes may give rise to input foreclosure.
          According to Impala, pre-Transaction, Sony/ATV had a strong incentive to
          license its content to its own downstream businesses and to similar third-party
136 Sony Group has a minority, non-controlling interest in Vevo, LLC (“VEVO”), a music video website
    owned by Sony Music, Universal Music, Abu Dhabi Media, and Google. As this share does not grant
    Sony any control over VEVO, the vertical relationship between Sony/ATV and VEVO is not further
    discussed in this decision.
                                                      48
 ---pagebreak---            controlled competitor businesses in order to maximise the revenues flowing
           back to Mubadala in respect of the EMI MP catalogue. The change from joint to
           sole control would increase Sony/ATV’s incentive to pursue a strategy of
           refusing to license Sony/ATV’s songs (including those in the EMI MP
           catalogue) or to license only on commercially unfavourable terms to those on
           which it licenses to other Sony businesses.137
(220)      Considering the estimated combined market shares of Sony/ATV and EMI MP
           in the relevant upstream markets and the estimated market shares of the Sony
           group in the relevant downstream markets, a number of relevant markets are
           affected:
         (a)      As noted, recorded music involves licensing mechanical publishing rights.
                  In the upstream market for the exploitation of mechanical rights
                  Sony/ATV and EMI MP's market share is 30% or higher in the following
                  six countries: the Czech Republic, Denmark, Greece, Poland, Portugal and
                  Slovenia. As regards the downstream market for recorded music, the
                  market share of Sony Music is 30% or higher in the following three
                  countries: Spain, Italy and Denmark.
         (b)      Motion picture production, TV programme production and videogame
                  production may involve licensing synchronization rights. In the upstream
                  market for the exploitation of synchronisation publishing rights,
                  Sony/ATV and EMI MP's market share is above 30% in the following six
                  countries: Germany, the United Kingdom, the Czech Republic, Poland,
                  Greece and Slovenia. As regards the other downstream markets mentioned
                  above (motion picture production; TV programme production; and
                  videogame production), the market shares of Sony Group's downstream
                  businesses do not exceed 30%.
(221)      Section 6.3.1 discusses the vertical link between the licensing of mechanical
           publishing rights and recorded music; Section 6.3.2 discusses the vertical link
           between the licensing of synchronization rights and motion picture production,
           TV programme production and videogame production.
              6.3.1.   Licensing mechanical rights for recorded music and recorded music
                       6.3.1.1.   Recorded music - Product market definition
(222)      Sony is active in recorded music through its wholly-owned subsidiary Sony
           Music Entertainment Inc. ("Sony Music"), which is the successor of a 50/50
           joint venture formed in 2004 between Sony and Bertelsmann, which was known
           at the time as Sony BMG, before becoming wholly owned by Sony in 2008.
(223)      Recorded music is sold in physical form (mainly CDs) and digital form. When
           producing an album, recorded music companies require the grant of mechanical
           rights to each of the musical works that will be recorded by the artist. Royalty
           rates for licensing mechanical rights are determined by national collecting
           societies, which play an essential role in the administration of such rights,
137 Final IMPALA Preliminary Submission, 14 August 2018, page 32.
                                                   49
 ---pagebreak---            through monitoring sales and collecting royalties on behalf of authors and their
           publishers.
(224)      The Notifying Party submits that there is no reason to distinguish between
           physical and digital distribution channels of recorded music companies.
(225)      In previous cases, the Commission has distinguished between physical and
           digital recorded music.138 The market investigation in the present case has not
           provided any indications that the Commission should depart from its previous
           findings. In any event, no vertical concerns arise, regardless of whether separate
           physical and digital recorded music markets are distinguished or not.
                         6.3.1.2.     Recorded music - Geographic market definition
(226)      The Notifying Party submits that broad geographic market definitions are most
           appropriate for the purpose of assessing vertical effects in the present case.
(227)      In Sony/SonyBMG, the Commission considered that the market for the sale of
           recorded music in physical format and market for the licensing of recorded
           music in digital format had a national scope.139 In Universal Music Group/EMI
           Music the Commission concluded that the market for the wholesale distribution
           of physical recorded music and of digital music were national in scope and
           noted that in any event, the competitive assessment remained the same even if
           the wholesale distribution of digital music market were considered to be EEA-
           wide.140
(228)      In the present case, it can be left open whether the geographic market definition
           is national or EEA wide as no vertical concerns arise, regardless of whether the
           geographic market is EEA wide or national.
138 Sony/SonyBMG, paragraphs 12 and 18; Universal Music Group/EMI Music, paragraphs 117-167. To
    assess the vertical relationship between music publishers and recorded music companies, the Notifying
    Party submits that there is no reason to distinguish between physical and digital distribution channels
    of recorded music companies because of general considerations which apply to the vertical assessment
    of the present Transaction, i.e.:
    - As regards potential concerns about customer foreclosure (i.e., a possible concern that Sony Group’s
    downstream businesses could foreclose competition in upstream music publishing markets), the
    Notifying Party submits that such concerns are not likely to turn on the exact delineation of
    downstream markets or sub-markets. Instead, this analysis depends on the overall share of relevant
    purchases accounted for by the various downstream businesses. For example, for the licensing of
    synchronization rights, customer foreclosure effects do not turn on, e.g., market definition in
    videogame production, but on the overall importance of Sony Group’s downstream businesses as a
    share of total synchronization rights consumption.
    - As regards potential concerns about input foreclosure, (i.e., a possible concern that Sony/ATV or
    EMI MP could foreclose competition in downstream markets) the Notifying Party submits that such
    concerns do not turn on the exact delineation of downstream markets or sub-markets either. Instead,
    this analysis depends on the combined position of Sony/ATV and EMI MP in the relevant upstream
    music publishing market and the importance of the input at issue. In the absence of a dominant
    position on any upstream market, downstream input foreclosure is unlikely, irrespective of the precise
    downstream market definition.
139139 Sony/SonyBMG, paragraphs 37 and 41.
140 Universal Music Group/EMI Music, paragraphs 231-232.
                                                        50
 ---pagebreak---                        6.3.1.3.   Input foreclosure
(229)    In a merger between companies which operate at different levels of the supply
         chain, anti-competitive effects may arise when the merged entity's behaviour
         could limit or eliminate competitors' access to supplies (input foreclosure).
(230)    In assessing the likelihood of an anticompetitive input foreclosure scenario, the
         Commission examines: (i) whether the merged entity would have post-merger
         the ability to substantially foreclose access to input; (ii) whether the merged
         entity would have the incentive to do so; and (iii) whether a foreclosure strategy
         would have a significant detrimental impact on effective competition
         downstream.141
(231)    The Notifying Party submits that the Transaction will not give Sony Group the
         ability or incentive to engage in input foreclosure. First, [information on Sony’s
         future commercial strategy]. Second, Sony/ATV would not have sufficient
         upstream power to engage in a successful input foreclosure strategy. Third,
         authors, who have the final say on whether to contract with a particular music
         publisher or recorded music company, would not countenance any policy
         designed to favour Sony Music. Fourth, mechanical rights are administered and
         licensed for offline use by collecting societies, which set the pricing and the
         licensing terms for those rights on a fair and non-discriminatory basis, not by
         publishers. Fifth, such strategy would not have a material effect, given the
         strong competition from other recorded music companies (in particular
         Universal Music and Warner Music).
(232)    The Commission considers that any risk of input foreclosure by Sony/ATV to
         the benefit of Sony Music can be excluded from the outset. First, as explained
         above, the control over offline mechanical rights, which is the relevant input for
         the downstream recording music market, is in the hands of the collecting
         societies, which set the pricing and the licensing terms for those rights on a fair
         and non-discriminatory basis. Second, the Parties' estimated combined share in
         publishing mechanical rights would be 30% or higher in just six EEA Member
         States: the Czech Republic ([30-40]%), Denmark ([30-40]%), Greece ([30-
         40]%), Poland ([30-40]%), Portugal ([30-40]%), and Slovenia ([30-40]%), and
         therefore, given these market shares do not enjoy a sufficient degree of market
         power to engage in a successful input foreclosure strategy. In any event, Sony's
         market share for the licensing of mechanical rights is unaffected by the
         Transaction given that, since 2012, Sony has exercised joint control over EMI
         MP and Sony/ATV has administered EMI MP’s catalogue and had the sole and
         exclusive right to license EMI MP’s mechanical rights over that period. Finally,
         other than IMPALA respondents to the market investigation did not raise input
         foreclosure concerns.
                       6.3.1.4.   Customer foreclosure
(233)    According to the Non-Horizontal Merger Guidelines a downstream firm being
         part of a vertical merger may refuse to buy inputs from its rivals input suppliers
141   See Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the
      control of concentrations between undertakings ("Non-Horizontal Merger Guidelines"), OJ C 265,
      18.10.2008, p. 11, paragraph 32.
                                                     51
 ---pagebreak---            as a result of the Proposed Transaction. This incentive to foreclose access to
           customers downstream may result from the vertical integration of an upstream
           supplier with an important customer downstream. Due to their downstream
           presence, the merged entity may foreclose its upstream rivals' access to an
           important customer base. In turn this can inhibit upstream rivals to effectively
           compete.142
(234)      The Notifying Party submits that Sony music does not have the ability or the
           incentive to engage into a successful customer foreclosure strategy to the benefit
           of Sony/ATV. First, it would not have sufficient market power in the market for
           recorded music. Sony Music’s estimated 2017 share of European recorded
           music sales was below 25%, with shares for physical and digital sales estimated
           at [20-30]% and [20-30]%, respectively. Sony Music’s share is below 30% in all
           but three Member States143 ([30-40]% in Denmark, [30-40]% in Italy, and [30-
           40]% in Spain). Second, the objective of Sony Music is to sell as many records
           as possible and it would be commercially ruinous for it to constantly overlook
           songs that it believed would be commercially successful, or to license songs that
           it thought would be unlikely to be successful, in order to prefer authors
           contracted to Sony/ATV or EMI MP.
(235)      The Commission considers that, as the Transaction does not lead to an increase
           the size of Sony Music recorded music business, it does not make a possible
           customer foreclosure strategy more profitable than pre-merger. In any event,
           even pre-merger, it would not make sense for Sony Music not to source
           mechanical rights belonging to publishers other than Sony/ATV and/or EMI MP
           as these publishers only account for a limited portion of the upstream market
           and Sony Music has an incentive to offer to its customers (and its recording
           artists) songs from the broadest possible number of authors and composers.
           Finally, respondents to the market investigation did not raise customer
           foreclosure concerns.
              6.3.2.   Licensing of synchronization rights for videogames, motion pictures
                       and TV programmes and videogame production, production of
                       motion pictures and production of TV programmes
(236)      As the relevant input for the videogames, the motion pictures, and the
           production of TV programmes is the same (synchronisation rights) the vertical
           effects on these downstream markets will be analysed jointly by the
           Commission.
                       6.3.2.1.  Product market definition
                  (a) Videogame production
(237)      Sony Group is active in videogame production through its wholly-owned
           subsidiary Sony Interactive Entertainment, which develops and publishes video
           game titles for its PlayStation range of handheld and home console video game
142 Non-Horizontal Merger Guidelines, paragraph 58.
143 Sony Music’s share in physical sales exceed 30% only in Italy ([30-40]%). Sony Music’s share in
    digital sales exceeds 30% only in Italy ([30-40]%), Spain ([30-40]%), Portugal ([30-40]%), and
    Denmark ([30-40]%).
                                                    52
 ---pagebreak---            systems. Videogames require synchronization right licences to use copyrighted
           music synchronized with the visual image.
(238)      In Vivendi/Activision144, the Commission assessed the vertical relationship
           between Vivendi and Activision against an overall downstream market for all
           videogames.
                   (b) Production of motion pictures
(239)      Motion pictures incorporate songs and music, which in turn require a
           synchronization licence of the relevant musical work.145 Sony produces,
           acquires, and distributes motion pictures for theatrical release through its wholly
           owned subsidiary Sony Pictures Entertainment (“SPE”). SPE’s motion picture
           interests include Colombia Pictures, Tri-Star Pictures, Sony Pictures Classics,
           and Screen Gems.
(240)      In Sony/SonyBMG,146 the Commission considered a vertical relationship with
           Sony’s downstream motion picture production interests based on an overall
           market for motion pictures (assessed through box office revenues). Also in
           Sony/Mubadala/EMI Music Publishing147, the Commission viewed motion
           picture production as a separate relevant market, with a possible sub-segment
           limited to U.S.-produced films.
                   (c) The production of TV programmes
(241)      TV production companies require synchronization rights from the copyright
           holder/publisher to incorporate music in TV programmes. SPE produces and
           distributes TV programmes. SPE’s principal TV operations are run through its
           wholly-owned subsidiary Sony Pictures Television Group (“SPTG”), which
           owns and distributes its own programmes, as well as programmes developed by
           a number of companies, including Tandem Productions, ELP Communications,
           and Barry & Enright Productions. The Commission notes that this market is also
           referred to as the production of “other TV content”.148
(242)      The Notifying Party submits that for the purpose of assessing vertical effects,
           consistent with the approach taken by the Commission in Sony/Mubadala/EMI
           Music Publishing, the relevant downstream market is TV programme production
           with no need for further delineation.149 According to the Notifying Party the
           vertical relationship between music publishing and TV programme production
144 Vivendi/Activision, paragraphs 77-82.
145 Synchronization customers also require a recorded music licence if they choose to synchronize a pre-
     recorded version of a particular work. Alternatively, once a customer has been granted the music
     publishing synchronization right, they can choose to record a new version of the relevant work.
146 Sony/SonyBMG, paragraph 96.
147 Sony/Mubadala/EMI Music Publishing, paragraph 276.
148 With regard to the market for the production and supply of TV audio-visual content, in previous
     decisions, the Commission has concluded that there are separate markets for: (i) the production and
     supply of commissioned TV content; and (ii) the licensing of broadcasting rights for pre-produced TV
     content (available ‘off-the-shelf’) (see Commission decision of 7 April 2017 in case M.8354 – Fox /
     Sky. Commission decision of 24 February 2015 in case M.7194 – Liberty Global / Corelio / W&W /
     De Vijver Media).
149 Sony/Mubadala/EMI Music Publishing, paragraph 277.
                                                         53
 ---pagebreak---            does not give rise to any concerns, irrespective of the downstream market
           definition adopted.150
(243)      The Commission considers that the question whether the market for TV
           programme production should be further segmented can be left open given that
           the Transaction does not give rise to vertical concerns irrespective of the precise
           product market definition.
                         6.3.2.2.     Geographic Market definition
(244)      The Notifying Party submits that broad geographic market definitions are most
           appropriate for the purpose of assessing vertical effects in the present case151
           and that accordingly, the relevant geographic markets for each downstream
           business are at least EEA-wide in scope. 152
(245)      The Commission considers that the question whether the downstream markets
           are national or EEA-wide can be left open as regards videogame production and
           the production of TV programmes as the Transaction does not raise serious
           doubts under any plausible geographic market definition, while the market for
           the production of motion pictures is EEA-wide.153
                         6.3.2.3.     Input foreclosure
(246)      The Notifying Party submits that, first, whilst music is generally needed to
           produce certain motion pictures, TV programmes and videogames, content
           producers have many alternatives to Sony/ATV's repertoire. Second, the
           Notifying Party submits that synchronization fees represent a small proportion
           of the typical cost of producing a motion picture, TV programme, or videogame
           and any such strategy would not be capable of materially affecting competition
           on any downstream market. On this basis, the Notifying Party considers that the
           Transaction will not give Sony Group the ability or the incentive to engage in
           input foreclosure.
(247)      In its decision in Sony/Mubadala/EMI, the Commission considered, as regards
           the ability of Sony/ATV to foreclose Sony Group's downstream competitors,
           that if Sony/ATV were to engage in foreclosure, content producers competing
           with Sony Group's downstream business would retain sufficient alternatives in
           the market for synchronisation publishing rights.154 The Commission considered
150 The Notifying Party submits that SPTG’s TV programme production shares are well below 20% in
     each of the possible subsegmentations of this market (as used in past Commission decisions such as in
     Commission decision of 7 April 2017 in case M.8354, Fox/Sky) including in (i) the production and
     supply of commissioned TV content and (ii) the licencing of broadcasting rights for pre-produced TV
     content (and its possible subsegments by content type (films, sports and other TV content) and by
     exhibition window (SVOD, TVOD, PPV, First Pay-TV window, Second Pay-TV window, FTA).
151 See Sony/Mubadala/EMI Music Publishing, paragraph 288; Sony/Sony-ATV, paragraph 179.
152 The Notifying Party submits that producers of TV programmes, motion pictures, and videogames do
     not typically vary their selection of music publishing rights as between countries. Rather, the choice of
     songs used for a given motion picture, TV programme, or videogame is made by the production studio
     on a global basis, very often outside the EEA (e.g., the United States). For these reasons, an EEA-level
     geographic market definition is the most appropriate way to assess these vertical relationships.
153 Commission Decision of 13 July 2010 in Case M.5779 - Comcast / NBC Universal, at para. 54.
154  Sony/Mubadala/EMI, recital 283.
                                                          54
 ---pagebreak---          that it was unlikely that Sony/ATV would have the incentives to adopt such a
         strategy as it would forego revenues from synchronisation rights whereas the
         impact to increase revenues on the downstream markets (through the production
         costs for computer games, TV programmes or films) appeared to be de
         minimis.155 The Commission also considered that any attempt at input
         foreclosure on the part of Sony/ATV would risk undermining its credibility and
         reputation on the market for publishing services to authors.
(248)    In its Decision in Sony/Sony-ATV156, the Commission noted that during the
         market investigation, the Commission consulted the views of competitors of
         Sony Group's videogame, motion picture and TV productions as regards the
         availability of songs to synchronise with the content they produce post
         Transaction. The majority of the respondents in each relevant downstream
         market had confirmed that, post Transaction, they would still have a sufficient
         choice of songs to synchronise with their contents, even without Sony's songs.
         They also confirmed that they did not expect that Sony Group would foreclose
         access to the catalogue of Sony/ATV.
(249)    The Parties' estimated combined share at an EEA-level in 2017 are [20-30]% for
         synchronisation rights and is above 30% only in the following six Member
         States: Germany ([30-40]%), the United Kingdom ([30-40]%), the Czech
         Republic ([40-50]%), Poland ([30-40]%), Greece ([30-40]%) and Slovenia ([30-
         40]%) and therefore, given these market shares do not enjoy a sufficient degree
         of market power to engage in a successful input foreclosure strategy. Moreover,
         the Transaction will not increase Sony's market share for the licensing of
         synchronization rights given that since 2012, Sony has exercised joint control
         over EMI MP and Sony/ATV has administered EMI MP’s catalogue and has
         had the sole and exclusive right to license EMI MP’s synchronization rights
         over that period. Accordingly, the Transaction will have no effect on Sony's
         upstream market share.
(250)    In addition, the Commission notes that during the market investigation, no
         competitors of Sony Group's videogame, motion picture and/ot TV productions
         complained about a potential input foreclosure. Furthermore, it is unlikely that
         Sony/ATV’s incentives would change post-Transaction because its reputation
         and ability to attract and retain authors depends, in part, on its ability to license
         their rights as widely as possible and on the best available terms. Any systematic
         policy that sought to favour Sony Group’s downstream businesses could
         jeopardize Sony/ATV’s reputation and impair its competitiveness. Furthermore,
         given the alternatives to Sony/ATV's repertoire and the small cost that
         synchronization rights represent in the overall cost of production of a
         videogame, a motion picture or a TV programme, even if Sony/ATV were to
         favour Sony Group’s downstream businesses, it is unlikely that any such policy
         would (or could) have a material effect on the competitive position of either
         Sony Group’s downstream businesses or competitors of those businesses.
155 Sony/Mubadala/EMI, recital 284.
156 Sony/Sony-ATV, paragraph 174.
                                                 55
 ---pagebreak---                   6.3.2.4.   Customer foreclosure
(251) The Notifying Party submits, first, that the market shares of Sony Group's
      downstream businesses in the relevant downstream markets are too low to
      constitute a sufficient customer base to engage in customer foreclosure. Second,
      the Notifying Party submits that engaging in customer foreclosure would be
      highly detrimental to Sony Group's downstream businesses and would have no
      effect on Sony/ATV's competitors.
(252) First, the Commission notes that the market shares of Sony Group's businesses
      in the downstream markets for each of videogames, motion pictures and TV
      programmes are the following:
(a)   Videogames: Sony estimates that its shares of EEA videogame revenues are
      below 5%. Sony also estimates that its EEA-wide market shares in all plausible
      market segments are the following: games for handled consoles only ([0-5]%),
      games for mobile handsets (handheld consoles and mobile and tablet devices)
      ([0-5]%), music games ([0-5]%); games for TV consoles and handled consoles
      ([10-20]%); offline games for Sony PlayStation consoles ([10-20]%);
(b)   Motion pictures: Sony estimates that its share of revenues from the production
      of motion pictures is approximately [5-10]% in the EEA and that in a potential
      motion picture production market limited to US-produced films, the Parties
      submit that SPE's market share in the EEA would be below 25%; and
(253) TV programmes: Sony estimates that its share of revenues in TV programmes is
      below 5% in the EEA and that such share does not exceed 20% in any EEA
      Member State or linguistically homogenous area.
(254) Based on the above, the Commission considers that the relevant Sony Group
      businesses therefore do not constitute a sufficient customer base for Sony to
      have the ability to foreclose competing music publishers.
(255) Second, the Commission notes that the evidence submitted by the Parties shows
      that Sony Group's businesses in the downstream markets for motion pictures,
      TV programmes and video games have traditionally not preferred Sony/ATV's
      repertoire. Data concerning the songs used in the top 8 grossing movies in the
      season 2016/2017 by Columbia Pictures (controlled by SPE) show that only
      […]% of these songs involved synchronization licence from Sony/ATV, […]%
      from EMI MP and […]% from Sony Music. These shares are lower than
      Sony/ATV's and EMI MP's EEA market shares for synchronisation rights of
      [20-30]%. Data concerning the songs used in the TV programmes produced by
      Sony Pictures Television Group during the season 2016/2017 show that less
      than […]% of these songs involved synchronisation licence from Sony/ATV,
      less than […]% from EMI MP and around […]% from Sony Music. These
      figures are lower than Sony/ATV's and EMI MP's EEA market shares for
      synchronisation rights of [20-30]%. Data concerning the use of songs in
      videogames produced by Sony interactive Entertainment Europe in 2017 show
      that […]% of these songs involved synchronization rights licensed from
      Sony/ATV, […]% licensed from EMI MP and […]% licensed from Sony Music.
                                             56
 ---pagebreak---           6.3.3.   Conclusion on vertical effects
(256)  For the reasons above, the Commission concludes that the transaction does not
       raise serious doubts as to its compatibility with the internal market in relation to
       vertical effects.
7.    CONCLUSION
(257)  For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with
       the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of
       the Merger Regulation and Article 57 of the EEA Agreement.
                                                     For the Commission
                                                     (Signed)
                                                     Margrethe VESTAGER
                                                     Member of the Commission
                                              57