Times still tough for UMG

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In another tough year, Vivendi's Universal Music Group division reported that 2007 adjusted earnings tumbled 16.1% to €624 million ($946.7 million). Revenue dropped 1.7% to €4.9 billion ($7.4 billion), up 3% at constant currency.

Vivendi said Friday that the EBITA result was impacted by foreign exchange rates, restructuring costs related to the acquisitions of Bertelsmann Music Publishing and Sanctuary and legal settlements generating extraordinary recovery in cash in 2006. According to Vivendi CEO Jean-Bernard Levy, underlying 2007 EBITA performance was comparable with 2006.

UMG margin in 2007 was 12.8%, down from 15% a year ago. Despite the fall, Levy qualified that figure as very high, saying, "It would not be very difficult to show that we earn more money than all our competitors together."

Digital sales were up 51% to about €700 million ($1.1 billion), now representing 14% of total recorded revenue for the group (22% for North America). Vivendi CFO Philippe Capron noted the €229 million ($347.4 million) jump in digital almost compensated for the €283 million ($429.4 million) loss on physical sales.

Capron also stressed that Universal's music market share rose in each of the company's 20 main markets. Despite a "difficult market," he foresaw a slight growth for UMG in 2008, thanks to the full-year integration of BMG and Sanctuary.

When asked about new label acquisitions — outside of Universal's buy last week of Univision Music Group — Universal Music France, Middle East and Mediterranean-South America president Pascal Negre said the company would look at any interesting opportunity.

Negre said he was seeing subscription models as a remarkable emerging trend for digital sales, be they linked with ISPs or mobile carriers offers or with devices.

Regarding digital rights management, he said 97%-98% of the U.S. legal digital market was DRM-ized, though he acknowledged that UMG still was testing DRM-free sales. "We won't make a strategic decision on DRM like EMI did," he said. "We don't have the feeling that the decision they made had a spectacular impact on their turnover."

Aymeric Pichevin is a reporter for Billboard.
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