UMG's Digital Sales Outpace Physical as New Vivendi Content Head Outlines Priorities

Vivendi's new head of media and content businesses on Tuesday outlined some of his early priorities after the French entertainment and telecom conglomerate's latest earnings report.

The company, which owns Universal Music Group, Canal Plus and various telecom businesses, among others, said that Universal Music Group in 2013, for the first time in its history, got a majority of its revenue from digital operations.

Former Hearst Magazines International executive VP Arnaud de Puyfontaine joined Vivendi as senior executive vp of media and content activities in early 2014. During an earnings conference Tuesday, he briefly introduced himself, saying that after five weeks in the job, he was "extremely enthusiastic about Vivendi's media operations."

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He said his career of 25 years that has seen him work for French, British and U.S. media groups has instilled in him a focus on "performance, innovation, boldness and strong financial discipline."

Hinting at his early focus at Vivendi, he said "I want to focus on growth by leveraging Vivendi's existing strength, accelerating the underlying performance" of the media operations and implementing a new digital strategy that takes advantage of growth opportunities.

Without providing further details, he said that overall, "the new Vivendi must be an industrial media group to achieve our growth ambition."

Vivendi on Tuesday reported improved fourth-quarter adjusted earnings and full-year financials in line with expectations despite what it called "a challenging environment," mainly at its French telecom unit. Analysts said the fourth-quarter results came in slightly below their expectations though.

The company is planning to focus on its media assets and spin off its main telecom arm later this year. It has recently been approached about a potential deal for French telecom arm SFR.

"There will be no new announcement today on Vivendi's [asset] strategy," CEO Jean-Francois Dubos said in opening a results conference. He said the company split was on track to happen mid-year.

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The French music, pay TV and telecom conglomerate reported adjusted earnings of $401 million (€292 million), compared with $144 million (€105 million).

Including certain items, the company swung to a profit of $764 million (€556 million) from a loss of $2.03 billion (€1.48 billion). Revenue dropped 4.6% to $8.17 billion (€5.95 billion).

Vivendi's Universal Music Group posted a quarterly revenue decline of 9.3%, or 3.3% assuming constant currencies, with its earnings down 11.1%, or 7.8% at constant currencies. Results were negatively affected by weakness in Japan and the integration of EMI.

Full-year 2013 revenue at UMG rose 12.8% at constant currency rates, with earnings up 1.4%. Top recorded music sellers for 2013 included Eminem, Katy Perry, Imagine Dragons, Lady Gaga, Drake and Robin Thicke.

"For the first time in 2013, yearly digital sales exceeded physical sales," Vivendi said Tuesday, with management later explaining that digital accounted for 51% of revenue.

At constant currencies, adjusted for the acquisition of the EMI recorded music assets, revenue in 2013 were in line with 2012 "as the decline in physical sales was offset by the growth in digital and other revenues, with subscription and streaming revenue increasing by approximately 75% over the prior year," Vivendi said.

"Fourth-quarter results have come in slightly below expectations," said Jefferies analyst Jerry Dellis. "UMG, which beat last quarter, looks weaker this time."

  • This article originally appeared in THR.com.

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