Universal’s Virgin Music Group to Acquire Downtown Music

Martina
18 December 2024, Wednesday

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Virgin Music Group, the global independent music division of Universal Music Group (UMG), has announced its acquisition of Downtown Music Holdings LLC (Downtown) for cash consideration of $775 million (approximately €737 million).

Virgin Music to invest into “the global independent music ecosystem”

Virgin Music Group has officially entered into a “definitive agreement” to acquire Downtown, which is expected to close in the second half of 2025. As the companies claim, the agreement marks a significant development for both.

“On behalf of Andrew, Pieter, and myself, it is very exciting for Downtown to be joining forces with Virgin Music,” said Justin Kalifowitz, founder and executive chairman of Downtown.

“This is a tremendous recognition of the importance and vitality of independent music, and the value that our company brings to its clients every day. Downtown was established with the belief that artists and entrepreneurs everywhere and at every stage are entitled to the same tools and opportunities to succeed. We have no doubt that the breadth and high level of service Downtown provides to its clients will be strengthened working with Nat, JT and the whole Virgin Music team.”

Virgin Music Group echoed the enthusiasm, highlighting the broader implications for the independent music ecosystem. “It’s an exciting time for Virgin as we continue to build a next-generation music company for independent artists and labels,” said Nat Pastor, Co-CEO of Virgin Music Group.

“We aren’t just making an acquisition; this is an investment into the global independent music ecosystem and a commitment to nurture current and future creators and entrepreneurs with world-class support, services, and capabilities they require at any phase of their careers,”

Co-CEO JT Myers, added the partnership would enable Virgin Music “to expand on the Downtown legacy and offer the independent music community a dynamic and innovative global infrastructure both in terms of service offering and territorial footprint.”

Established in 2007, Downtown Music is a leading independent rights management and music services company. It supports creators and businesses across a variety of fields and areas, including music creation, distribution, publishing, marketing, royalty collection, financing, accounting, and payment services.

With over 10 sub-businesses and 20 offices across six continents, Downtown collectively serves 5,000 business clients and more than 4 million creators in 145 countries. What’s more, Downton artists have recently been recognized with nearly 150 nominations for the upcoming 2025 GRAMMYs.

During the customary regulatory approval period (aka, the transition period), the two companies will continue to operate independently, with the full merger expected once the deal is closed.

Advisors on the transaction included Goldman Sachs & Co. LLC and Skadden, Arps, Slate, Meagher & Flom LLP for Downtown Music, and Kirkland & Ellis LLP, PwC, and Freshfields for Virgin Music Group.

What's UMG’s real intention?

Not everyone views Virgin’ acquisition of Downtown Music positively. The European Independent Music Companies Association (IMPALA) has voiced serious concerns, arguing that the deal intensifies the market concentration and further limits indie artists’ pathways to success.

IMPALA highlights that Downtown is responsible for “a significant portion of the independent sector's delivery to digital services,” meaning that the deal allows UMG to expand its footprint into distribution and further services for artists and labels. This, as they argue, squeezes out the independents in an already very concentrated market.

Helen Smith, executive chair of IMPALA, has labeled the agreement “another land grab,” accusing UMG of using its dominant position to take another huge market share and thus diminish access for independent artists and labels.

Similarly, Martin Mills, founder of the British record company Beggars Group, called the acquisition an attempt to establish “utter dominance and control.” Mills further criticized UMG for “cynically using” the Virgin brand — once synonymous with independent entrepreneurship — as a tool to achieve greater power and disenfranchise more artists.

IMPALA president Francesca Trainini has called on the European Commission (EC) to “establish a clear agenda on concentration in the music market.” The independent association has also urged regulators to investigate the deal and “answer the question the industry is asking about how it is possible for UMG to gain more market share after it was already considered too big.”

The Downtown-Virgin agreement marks, for many, another step in what critics describe as the “creeping dominance” of all major labels, a trend impacting Europe and beyond for years now. It’s therefore likely that more associations advocating for independent artists will oppose this deal, as well as any other similar agreements favoring one of the majors, in the future.