This is a memo sent by Virgin Music Group co-CEOs Nat Pastor and JT Myers to staff this week, responding to the criticisms that have been levelled at their planned acquisition of Downtown Music Holdings.
To the Virgin Music Group team:
As you all know by now, we are tremendously excited about the pending combination of Downtown and Virgin.
Given the bold visions of the future and the mutual respect our companies share, we are confident our combined business will be able to deliver enormous added value to our clients.
We are writing this note to you now for two reasons: first, to briefly update you on the regulatory status of the proposed acquisition, and second, to clear up some of the falsehoods that opponents of the deal are perpetuating, which I’m sure might even be confusing or concerning to you.
First, an update on the status of the merger: Last month, the European Commission initiated ‘Phase I’ of its review of Virgin’s acquisition of Downtown. In the coming weeks, the Commission is expected to announce whether it has no objection to the deal, in which case we will then proceed to close the transaction, or whether the Commission has decided to afford itself more time to review the case – for example by moving into “Phase II”.
Now to those falsehoods:
While the merger has rightly been under regulatory review around the world for the last six months, our priority has naturally been to present to the regulators our position on the transaction. We nevertheless want to bring truth to bear against some of the fictions and falsehoods being spread by the familiar cast of characters, including professional lobbyists, who oppose our companies’ coming together.
Here are a few examples:
1. FICTION: Virgin will exploit Downtown’s customer data to gain a competitive edge for UMG.
FACT: Virgin will not exploit Downtown’s customer base for any reason.
Virgin will not only uphold Downtown’s data privacy policies, we will also expand and strengthen them. Virgin already handles – with the care and confidentiality they deserve – the sensitive client data of hundreds of partners. Betraying the trust our clients have bestowed on us would be self-destructive: they would quickly, and quite rightly, end the relationship. Which is why we’re proud to say that since the day we entered this business, we have never had a single complaint of misuse of client information of any kind.
2. FICTION: Virgin will restrict or shut down services such as FUGA, Curve, CD Baby, Downtown Music Publishing, or Songtrust.
FACT: Virgin is doing this deal for exactly the opposite reason. We see the extraordinary value of investing in and expanding access to these and other platforms.
Over the last three years, we’ve been building Virgin within UMG as a standalone, global services business with its own leadership, tech stack, and autonomy. The deal with Downtown will strengthen the foundation we’ve built thus far. Our motivation for the merger and our excitement about it are rooted in this singular opportunity: by combining Downtown’s and Virgin’s unique capabilities, the unified company will offer an even more robust and flexible suite of services to independent labels everywhere.
3. FICTION: UMG’s market share in Europe (ex-UK) has skyrocketed by 18 percentage points since the EMI acquisition in 2012.
FACT: There is ZERO credible data to support this … and for a very good reason: It’s not true. The reality is that during this period the independent sector’s marketshare has grown materially, while UMG’s marketshare has not.
Why? Well, the growth of the independent community has been the product of several factors: private and venture capital has poured into both indie labels and services providers; artists have more tools than ever; streaming has democratized music; and a new generation of companies has flourished. Competition among the services businesses is thriving precisely because of the continued investment in them and the flood of new entrepreneurs – label executives and artists themselves – into the marketplace. The more investment that flows into the services businesses, the more independent labels benefit, because more investment means better resources and greater competition among services providers. Today, approximately one hundred services companies are competing to partner with independent labels and artists. The stronger the provider of services, the greater the chance that the independent label and artist has to succeed in today’s market.
Finally, we want to address a series of personal attacks that have been levelled against Virgin and us during this lobbying effort in the press. We have been called “wolves behind the cape” – that is, that we’re secretly preying on the very community we claim to serve. Nat and I are used to a bit of name-calling. But the insinuation that Virgin is anything but a positive force in the independent marketplace is an insult to all of you who comprise the Virgin Music Group family, who work tirelessly every day to help independent labels and artists achieve their goals. Any assertions to the contrary are juvenile, offensive, and are just falsehoods being spread by those who are willing say anything to hurt the chances of this deal happening.
The independent sector isn’t monolithic, as you know. It’s comprised of thousands of labels and artists all over the world. Some subscribe to the reductive “major = bad, indie = good” worldview, others don’t. We personally think that in an independent space this dynamic – comprised of the legendary “old guard” of iconic independent labels as well as a generation building the iconic companies of the future; of bootstrapped companies alongside ones backed by some of the largest private equity, venture capital and technology companies in the world; of artists just beginning their careers next to some of the largest global superstars – that things just aren’t that simple anymore.
But that’s just our opinion. We don’t get to decide for the whole independent space, but neither does anybody else. Every member of the independent community gets to make their own choice, based on their own value system. And that goes for their choice of service provider – companies can choose Virgin, Downtown or any of the scores of other partners, independent or major, based on their commercial needs and preferences.
That’s why, in 2022 the two of us joined Virgin to try and develop another choice – one that we felt would be a good one for entrepreneurs like us, one that we didn’t think was being provided by the many existing players in the market. With the acquisition of Downtown, we see a significant opportunity to provide independents with something even more effective to advance their commercial and creative goals. We also know that we will be competing every day with dozens of other global service providers, so in order to win we will have to be the best partners the indie community can work with. And that is exactly what we are going to be.
We are so excited about everything to come, and I know all of us at Virgin look forward to speaking directly with all of our Downtown colleagues very soon.
Wishing you all the best,
Nat & JT
