Deezer now under control of major label owner, no longer a French company

Following approval from France’s competition regulatory body L’Autorité de la concurrence, digital music company Deezer is now under the control of Ukrainian-born American billionaire Len Blavatnik’s London-based Access Industries empire.

Among its many assets is Warner Music Group, which it bought for $3.3 billion (A$4.3 billion) in 2011.

Access gained a 26.9% stake in Deezer in 2012, and on January 12, expanded that to over 50% after injecting the platform with an €100 million (A$144.5 million) in a joint venture with Orange telecommunications which has 10%.

Bruno Lasserre, President of the Autorité de la concurrence, said that despite Deezer’s now tie-up with one of the three major labels in the world, there were a number of reasons that showed little possibility of the anti-competitive and discriminatory behaviour that its rivals showed concern over the “vertical link” with Warner.

The decision, outlined in an 11-page document from June 24, was only made public late last week.

Firstly, it estimated, Warner Music has only 20% to 30% market share in France, where Universal Music has 40% to 50% and Sony 20% to 30%.

Within the European Economic Area (EEA), Warner share is 10% to 20%, Universal’s is 30% to 40% and Sony’s is 20% to 30% with indie labels accounting for 20% to 30%. Within the EEA, Warner’s digital market share is 20% to 30%, which is the same as Sony Music Entertainment’s and the independents each, while Universal Music is placed at 40% to 50%.

Secondly, Deezer’s operations are mostly in France, the fifth largest music market in the world, where it holds 40% to 50% of streaming share (compared to the 20% to 30% of its closest rival Spotify), but only 0.5% internationally where it is found in 80 countries. Spotify’s global share is put at 40% to 50%.

Thirdly, the Autorité wrote, Deezer will have to make deals with Universal and Sony as well, as its subscribers expect its catalogue to include tracks from all the majors at least. "The growing importance of this listening mode in France and in the world requires, for all majors, they strike licensing agreements with the major platforms," it stated.

The possibility that Deezer gets discounted leases from Warner Music is not an issue, the French body predicted confidently. If Warner Music went down that path, it would have licensing rates issues with the other streaming services.

"Since Warner is the smallest major, it only has a limited market power with regards to other platforms, which limits the risks of discriminating Warner Music to the benefit of Deezer," the authority concluded.

Deezer will remain headquartered in Paris, where it was founded in 2007, with no management changes expected.

Musical analysts are wondering how Access’ new status will work out for Deezer’s fortunes internationally, especially in the US where it is finding it difficult to get a foothold due to competition from Spotify, Apple Music and Tidal.

The platform has just released a new TV app in the US (where 99% of households own at least one screen and where 40% of users listen to music on their Smart TV apps) where music fans can stream 40 million tracks through their TV sets. It has features like lyrics for those with karaoke tendencies, a personalised soundtrack based on past preferences and Top 40 and mixes offerings.

According to Music Business Worldwide, Deezer had 6.34 million subscribers in the first half of 2015. It turns over revenue of €150 million ($224 million) a year, of that $157.1 million in both paid and ad-supported streaming in 2015. It lost just under €87 million ($132.6 million) in the three-and-a-half years from 2012 to end of June 2015 alone.

Between 2012 and 2014, it paid out €257 million ($380.5 million) total advances, €20.6 million ($30.4 million) of this to record companies.