Universal Music, the world’s largest record company, said it is transforming itself into a broader entertainment company that derives more revenue from untapped sources like advertising.
“New opportunities will emerge to monetize our assets and create new revenue streams,” senior executives told about 40 analysts and investors in London on Oct. 6.
Present at the London gathering were UMG chairman and CEO Doug Morris, president & COO Zach Horowitz, vice chairman & CFO Nick Henny and Universal Music Group International chairman and CEO Lucian Grainge.
“Universal Music is in the business of creating global stars and brands,” it said. “We are now beginning to expand our relationships with our artists and share in the multiple revenue streams that accrue from their success.”
The Universal executives also made the point that all the new revenue streams they are chasing still hinge on the company’s ability to sign and nurture singers and groups that consumers want to hear.
Record sales have been hammered for five years as listeners illegally downloaded music for free while the industry scrambled to revamp its business model.
Sales have begun to level off as mobile phone ringtones, legal downloading and subscriptions offset the decline in CD sales. Universal Music said those businesses have swelled to €100 million ($ 121.8 million) in the first-half of 2005 from virtually nothing two years ago.
Record companies continue to pursue new untested ventures, like Universal’s deal earlier this week making its music available to mobile phone maker Motorola for a new wireless service, iRadio.
Universal Music is hoping to take a piece of the $300 billion global advertising pie by selling music videos on demand over the Internet and on pay TV, chairman Doug Morris and other senior executives said. It already has deals in place with Yahoo, AOL and MSN.
The company also said without elaboration that it wants to “tap into the enormous demand for free music, and generate revenue from those who can’t or won’t pay.”
It said it is expanding its relationship with artists, pointing to cosmetics and clothing lines tied to new pop group Pussycat Dolls and the forthcoming biopic “Get Rich or Die Tryin” starring its top-selling rapper 50 Cent.
Total first-half revenue at Vivendi-owned Universal Music gained 9 percent from the year-ago period to €2.2 billion ($ 2.7 billion) as profits nearly tripled to €142 million ($ 173 million).
(c) Reuters 2005.