Congress to hold hearings on Universal-EMI merger

Sen. Herb Kohl, chairman of the Judiciary Committee's antitrust panel, is planning to hold hearings on Universal Music Group's proposed merger with EMI Music, a union that would give Universal roughly 40% of the U.S. market for recorded music.

No date has been set, according to Kohl's spokeswoman, Dawn Schueller.

Kohl, a Democrat from Wisconsin, was outspoken against AT&T's proposed $39-billion purchase of T-Mobile last year, a deal that failed after the U.S. Federal Communications Commission said it would oppose the merger. Congressional hearings have no formal sway over antitrust regulators who ultimately have the option of trying to block mergers in court.

Universal, in a statement, responded, "We welcome the opportunity to answer any questions that the subcommittee may have, address the facts and debunk myths. Universal Music is committed to reinvesting in EMI to create even more opportunities for new and established artists, expand the marketplace with more music and support new digital services. We remain confident of regulatory approval."

Its $1.9-billion bid for EMI is currently under review at the U.S. Federal Trade Commission as well as the European Commission. Neither has spoken for or against the proposed transaction.

European regulators earlier this year approved a separate bid by Sony Corp. to purchase EMI's publishing business for $2.2 billion, provided that Sony sold off some of its catalog. 

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-- Alex Pham

Photo: Chris Martin, lead singer of Coldplay, a band signed with EMI Music. Credit: Rafa Rivas / Getty Images.

Live Nation: Strong ticket sales boost first-quarter revenue

Concert giant Live Nation Entertainment Inc. posted an uptick in first-quarter sales, driven by higher ticket sales along with losses that were slightly less than expected as the company continues to spend heavily on upgrading its online ticketing infrastructure.

The Beverly Hills-based company, which also operates Ticketmaster, said Wednesday that revenue grew 2% in the quarter ended March 31 to $868 million, up from $849.4 million a year earlier. It also posted a net loss of $70.2 million, or 37 cents a share, up from a $54.3-million loss, or 27 cents a share, in 2011. The losses stem in part from the company's multiyear effort to build up its online marketing, ticketing and e-commerce capabilities.

Analysts polled by Thomson Financial on average had expected slightly higher revenue at $870.8 million, as well as higher losses of $71.3 million, or 39 cents a share.

Live Nation's Chief Executive Michael Rapino noted that ticket sales were especially strong in the first quarter. 

"Importantly, we also saw a 6% increase in ticket sales this quarter as compared to last year, reflecting strong demand for our live events and giving us great confidence that we are well positioned for the summer concert season," Rapino said in a statement.

The ticketing and live events company also announced it had acquired Cream Holdings, a British organizer of the Creamfields electronic music festivals and DJ club events. The companies did not disclose the purchase price.

Live Nation said Cream Holdings founder and chief executive James Barton will become president of Live Nation Electronic Music, charged with leading the company's expansion into the rapidly growing genre.

Live Nation's shares gained 10 cents to close at $8.31 prior to the earnings release.  

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Photo: A Creamfields music event. Credit: Creamfields.

Sonos to stream Tencent's QQ Music in China

How do small American companies make inroads in China? The trick may lie in finding mutually beneficial partnerships with local companies.

Sonos, a Santa Barbara company that makes wireless home audio systems, on Monday announced a deal with Tencent Holdings, a Chinese company whose QQ instant messaging platform is used by 721 million people.

The partnership calls for Sonos to build Tencent's QQ Music, a subscription streaming music service, into its devices sold in China. Financial terms of the arrangement were not disclosed. 

For Sonos, which started selling its products in China about a year ago, having a local juggernaut like Tencent on its side helps the company promote its products in a new market. Giving buyers the ability to instantly fire up an existing, legal music service right out of the box also helps Sonos differentiate itself from low-cost competitors in China.

Meanwhile, Tencent has been aggressively expanding its footprint beyond its stronghold in mobile, both in the U.S. and in China, by forging ties with American companies. (Last year, it spent $400 million to acquire a majority stake in a Santa Monica-based Riot Games Inc.) With Sonos, Tencent has a way to penetrate home entertainment systems, which some call "the living room play." 

It's also a way to get more of QQ Music's 200 million users to switch over from the free, ad-supported music service to the premium paid version. The hope is that Chinese consumers will pay for the convenience of being able to pipe QQ Music throughout their home via Sonos' devices. The QQ Music will be free initially on Sonos, but Tencent plans to begin charging users a monthly fee later this year.

Currently, several million subscribers pay QQ Music's monthly fee of 10 Chinese yuan, or roughly $1.59, for unlimited, ad-free access. (The company would not disclose exact subscriber figures.) The low ratio of paying users partly reflects the difficulties of getting Chinese consumers to pay for music that is otherwise readily available for free, albeit illegally, in an environment rampant with piracy. 

Last week, Tencent struck a similar deal Ford Motor Co. for its QQ Music service to be built into Ford's New Focus cars sold in China.

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Photo credit: Sonos

Microsoft: New music service on Xbox Live?

Microsoft Corp. is reportedly rehearsing for the launch of a new digital music service for its Xbox Live platform and elsewhere that could be announced at E3, set to take place in Los Angeles in June. 

The possibility, first reported in The Verge, would replace the Zune Music Pass service that Microsoft currently offers in favor of a more versatile service that would be available on more devices and platforms, including Facebook.

A Microsoft spokesman did not immediately reply to a request for comment. 

Microsoft has worked hard in recent years to beef up Xbox Live, an online entertainment marketplace accessable via the Xbox 360 game console. The Redmond, Wash., technology giant has been adding movies, television shows and live sports events via agreements with Netflix, Comcast, ESPN and others.

But music has also quietly gained momentum on the platform. Earlier this week, the company forged a deal with Epitaph Records to stream an upcoming album from a Los Angeles punk band, Pennywise. Microsoft also offers Last.fm on Xbox Live.

Last month the Microsoft said that for the first time since the Xbox 360 launched in 2005, time spent watching videos and listening to music on Xbox Live eclipsed the amount spent playing online games. More than 20 million people pay for the premium Xbox Live service, out of more than 66 million Xbox 360 consoles sold.

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Screenshot of Zune Pass music subscription service courtesy of Microsoft.

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Pandora: The No. 1 radio station in Los Angeles?

Pandora, the Internet streaming radio service, is the No. 1 radio station in Los Angeles by audience size, according to a poll released Tuesday by the Media Audit.

Pandora beat out local stations such as KIIS-FM, KNX-AM4, KROQ-FM5 and KOST-FM in the survey of 54,000 adults who were asked in the biennial phone poll, in October, what stations they had listened to in the previous week.

The research group estimated that 1.9-million people in Los Angeles listened to Pandora between September and October of 2011. The No. 2 station, KIIS-FM, garnered 1.4-million listeners in the same time frame, according to the survey.

The results dovetailed with Pandora's current efforts to launch advertising sales teams in local markets, including one this week in Los Angeles.

The Oakland-based company has come under heavy criticism from investors in recent months for not growing its advertising revenue quickly enough to make up for rising costs. In the last fiscal year Pandora paid $148.7 million — about 54% of its total revenue — in music royalties, contributing to a $16-million loss.

Ad revenue is widely seen by Wall Street as a way for the company to get ahead of its costs and turn a profit. But marketers have not paid as handsomely for Internet ads as they have for traditional media, including radio. Pandora is hoping surveys like the one from Media Audit will help persuade Madison Avenue that a listener of Internet radio is just as valuable as one who is tuning in to broadcast radio.

For now, Wall Street isn't turning up the dial on Pandora's stock. Its shares closed down 3 cents at $8.53, from an initial public offering price in June of $16 and a high of $20 in July. 

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Photo: Pandora co-founder Tim Westergren. Credit: Ryan Anson / Bloomberg. 

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SiriusXM snubs Liberty Media's takeover attempt -- again

Sirius XM Radio Inc. delivered a counterpunch Friday to Liberty Media's hostile takeover attempt in a brief it filed with federal regulators.

Liberty Media in March threw the first punch by asking the U.S. Federal Communications Commission to give it control over SiriusXM's operating licenses. Liberty argued that its 40% stake in SiriusXM gave it "de facto" control over the satellite radio company. It refined its argument further last Thursday, arguing that its stake, and control over five of the 13 seats on the Sirius board is "more than sufficient to determine the outcome of matters submitted to a vote of shareholders."

SiriusXM took umbrage over the characterization. In a brief filed with the FCC, SiriusXM scoffed at Liberty's argument that "40 is the new 50."

"There is no support for the remarkable proposition that a ... 40% minority interest, standing alone, is sufficient to bestow control of a public company," wrote SiriusXM's attorneys, who urged the agency's commissioners to dismiss Liberty's request.

Calls to the FCC were not returned, and Liberty Media's spokeswoman did not respond to requests for comment.

Eddy Hartenstein, publisher of the Los Angeles Times, is a non-executive chairman of the SiriusXM board.

The tussle for control over SiriusXM, which topped $3 billion in revenue in 2011, stems from a Faustian bargain its chief executive, Mel Karmazin, made in 2009 to accept a $530-million loan from Liberty Media's chairman, John Malone. The money, which has since been repaid, saved SiriusXM from having to file for bankruptcy protection.

The deal also gave Liberty Media a 40% stake in Sirius and five seats on the company's board. But it handcuffed Malone from making further moves to take over SiriusXM — at least until this March. When those restrictions expired, Liberty Media made its first move by petitioning the FCC for a transfer of SiriusXM's operating licenses.

For now, that's the least expensive path to gaining control of SiriusXM. But Liberty has other options, which it outlined in its petition last week to the FCC. Those include accumulating enough shares of SiriusXM to boost its stake above 50% and staging a boardroom coup by calling "a meeting of Sirius stockholders" and putting the matter to a vote. But doing so could trigger a big tax bill for Liberty Media if the transaction is deemed to be an acquisition.

Liberty's executives, including Greg Maffei, have suggested to Wall Street investors that it could also execute a complex, but tax-free Reverse Morris Trust, which would require Liberty to increase its share of SiriusXM above 50% or, ideally, above 80% to take full advantage of the tax breaks, according to Citigroup analysts.

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Photo: SiriusXM Chief Executive Mel Karmazin, left. Liberty Media Chairman John Malone, right. Credits: SiriusXM and Liberty Media.

European Union approves Sony EMI merger

The European Union's antitrust regulators on Thursday approved Sony Corp.'s $2.2-billion acquisition of EMI's publishing business, which would create the world's largest music publishing group with rights to about 2 million songs including some by David Bowie, Stevie Wonder and others.

In exchange for the EU's blessing, Sony agreed to sell off several European-based assets that together would have accounted for less than 5% of the combined company's overall revenue, said several executives close to the discussions who did not want to be named because they were not authorized to speak publicly on the matter.

The merger calls for Sony's music publishing subsidiary, Sony/ATV, to administer the EMI catalog on behalf of a consortium of investors, including the Blackstone Group, the Mubadala Development Co., the estate of Michael Jackson, GSO Capital Partners and veteran music and movie mogul David Geffen. Sony itself would be a minority partner.

Geffen's involvement, his first major investment in an entertainment company since co-founding DreamWorks SKG in 1994 -- after a long and successful career in the music industry -- came in the nick of time last fall as Sony struggled to pull together financing for the deal. When Mubadala pulled back some of its investment in the pool weeks leading up to the final bidding for EMI, Geffen jumped into the breach in late October -- days before Sony's offer was due.

Sony still needs to gain the approval of U.S. antitrust regulators who, like the European Commission, must decide whether the deal restricts competition and hurts consumers. The Federal Trade Commission, which has taken the lead in investigating the EMI sale, has not commented on the matter.

Sony, in a statement, said, it "looks forward to successfully concluding the other regulatory review processes that are underway in other regions."

Martin Bandier, chairman and chief executive of Sony/ATV Music Publishing, said: “Having spent over 17 years of my professional life helping to build EMI Music Publishing, today is not only an important milestone on the path to final approval, but a very special day for me, personally.”

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Photo: Stevie Wonder, whose songs' publishing rights are with EMI, at the Hollywood Bowl in 2011. Credit: Lawrence K. Ho / Los Angeles Times

Spotify forges marketing partnership with Coca-Cola

Spotify is hoping that Coke will teach the world to click its play button.

The Swedish digital music service on Wednesday announced a broad-ranging marketing deal with Coca-Cola Co. that could help turbocharge the number of people who are exposed to, and ultimately sign up for, Spotify.

Although the partnership does not involve any money changing hands, both parties describe it as invaluable to their efforts to market their products.

For Spotify, the burgeoning music-streaming service that launched in the United States in July, getting access to Coca-Cola's formidable global marketing engine will come in handy as it expands its international footprint.

Spotify operates in 13 countries, mostly in Europe, but has said it plans to launch its service in additional markets. Future launches could, for example, be promoted via Coca-Cola's beverage containers or advertising campaigns, said Jeff Levick, Spotify's chief marketing solutions officer.

In return, Coca-Cola can now use Spotify's service to instantly add music to its online marketing repertoire. For instance, the drink giant can add songs to its Facebook page via Spotify without having to negotiate licenses for each tune. (Spotify already has financial agreements with major record labels to pay royalties for every song that is played on its digital service.)

“The fact that they’re partners with labels was important to us,” said Emmanuel Seuge, head of global sports and entertainment marketing for Coca-Cola. “But first and foremost, we just fell in love with the service.”

Spotify has 10 million people who use the service at least once a month. Of those, 7 million plug into the free version of Spotify, which is partially supported by ads and is available only through a computer browser. The remaining 3 million or so people pay a monthly fee for a premium, ad-free version of the service that's also available on tablets and smartphones.

Coca-Cola has been one of Spotify's largest advertisers, and Wednesday's announcement does not call for any changes in that arrangement.

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Photo: From left, Joe Belliotti, Director Global Music Marketing, The Coca-Cola Co.; Emmanuel Seuge, Coca-Cola's Head of Global Sports & Entertainment Marketing; Daniel Ek, chief executive of Spotify; and Jeff Levick, Chief Marketing Solutions Officer of Spotify. Credit: Coca-Cola and Spotify.

Two labor unions back EMI sale to Universal Music

SAG-AFTRA, the merged entity of the Screen Actors Guild and the American Federation of Television and Radio Artists, and the American Federation of Musicians gave their blessings Tuesday to Universal Music Group's $1.9-billion deal to buy EMI's recorded music business, which represents bands such as Coldplay, Massive Attack, Pink Floyd and others, from Citigroup Inc.

The pending deal, forged in November, also calls for Sony ATV to pay $2.2 billion for EMI's publishing assets. Both require the approval of U.S. and European antitrust regulators, who must decide in the next few months whether the deal would restrict competition and harm consumers.

A number of critics have piped up against the deal, including the consumer advocacy group Public Knowledge and Warner Music Group, whose former Chief Executive, Edgar Bronfman Jr., took a swipe at the pending merger in January, calling it "dangerous." (Warner had also offered to buy EMI, but was outbid by Universal.)

It's not usual for a labor union to speak up in support of big business deals. With that backdrop, the dual union endorsements of the merger seems even more unusual, especially because other labor groups such as the Writers Guild have been outspoken critics of media consolidation.

Why this departure, then? In a word -- jobs.

SAG-AFTRA, which represents 150,000 actors, writers, recording artists and other media professionals, acknowledged in its letter Tuesday to the U.S. Federal Trade Commission that the group has "generally expressed skepticism toward corporate mergers and acquisitions." The FTC has taken the lead in examining the merger for potential antitrust issues.

In this case, however, the union said the merger would save EMI from drifting into "oblivion," wrote Kim Roberts Hedgpeth, outgoing co-national executive director of SAG-AFTRA, who this week announced her pending retirement.

Allowing EMI to deteriorate on its own "would also do a disservice to American workers, whose jobs would be at risk should EMI wither further or be sold in pieces to fuel quick profits for capital investors," she added.

Raymond Hair Jr., president of the American Federation of Musicians of the United States and Canada, put forth the same argument in a separate letter to the FTC, saying "sustaining the EMI legacy, which produced world popular music artists such as the Beatles and Frank Sinatra, under UMG's oversight would appear to benefit AFM recording musicians."

So far, neither the FTC nor the European Commission have issued opinions on the merger, which would fold EMI's assets into two of the world's largest record companies and reduce the number of major music companies from four to three.

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Photo: Chris Martin, lead singer of Coldplay, a band signed with EMI Music. Credit: Rafa Rivas / Getty Images.

Pandora listeners grow 59%

Pandora Media Inc.'s stock may have been on the decline, but the number of listeners for its online radio service has kept growing.

The Oakland company said Thursday that the number of active listeners (that is, people who have used the service at least once in the past 30 days) grew to 51 million in March, up 59% from a year earlier.

The amount of time users spend listening also grew -- to more than 1 billion hours last month, from 567 million hours in March 2011. Each Pandora listener spent more time on average with the service as well, about 19.6 hours in March compared with 17.7 hours a year ago.

But the increase in listening hours is a double-edged sword. Pandora must pay royalties on every song its service plays, so as the hours rack up, so do Pandora's licensing costs.

Still, the company could use a splash of good news. Its stock suffered a punishing 19% drop last month after it posted higher-than-expected losses and projected lower revenue for its first quarter this year. It closed down 13 cents to $9.92 Thursday, far below its $16 initial public offering price in June.

Wall Street analysts were heartened by the company's audience gains.

"We’re encouraged by Pandora’s share gains, and we continue to believe the company will improve mobile monetization as the regional sales force expands and audience measurement comparable with radio materializes," J.P. Morgan analysts Doug Anmuth and Shelby Taffer wrote in a note to investors.

But Anmuth and Taffer cautioned against popping the champagne cork just yet. Citing an article in the Wall Street Journal, they noted that major companies could follow Proctor & Gamble's recent move to crack down on employee usage of "bandwidth intensive" services at work, including Netflix and Pandora.

"About 18% of radio listening takes place in the workplace, and we believe many companies already prohibit access to streaming media sites," Anmuth and Taffer wrote. "We would not want to see this become a trend."

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Photo: Pandora co-founder Tim Westergren. Credit: Ryan Anson / Bloomberg