Asian market woes, thin first quarter release slate responsible, execs say

LONDON — Polygram has issued a profit warning in advance of its first-quarter results for 1998, this despite the conglom having outperformed the other music majors in a generally slow world music market in 1997.

Execs at the company indicated in February, when Polygram announced its fourth-quarter and year-end earnings, that events in Asia and a thin first-quarter release slate would portend a lowering in profits (Daily Variety, Feb. 12).

The music and film group blamed a weak international release schedule, higher marketing and recording costs, as well as in-stability in the Asian market for first quarter profits that will be “sharply lower” than last year. No figures were given.

Polygram’s music arm posted a 22% rise in sales last month, and though net sales rose 16%, its Filmed Entertainment arm posted a $53.4 million loss as part of its investment in distribution.

In 1997, Polygram’s star first-quarter performers were U2’s “Pop,” selling 5.5 million units, and Hanson’s “Middle of No-where” and the Christmas disc followup, “Snowed In,” which logged 8.4 million and 2.6 million in sales, respectively.

The warning also comes at a time when several of the conglom’s successful international acts, such as Andrea Bocelli, are beginning to attract Stateside interest. Bocelli’s “Romanza” has topped 6.8 million units.

Polygram’s first-quarter slate typically accounts for less than 20% of its full-year earnings. The company typically comes on strong in the second half. Polygram stock closed at 52 on Wednesday, the day before the advisement was issued.

Alain Levy, Polygram prexy and chief exec, said: “On a full-year basis, we have no indication that conditions in the music market should cause us to be pessimistic.

“With our music and film release schedules weighted to the second half of 1998 and particularly to the fourth quarter,” Levy added, “at the present time, we remain confident about our full-year performance.”

Films skedded for later this year include the Robin Williams/Cuba Gooding Jr.-starrer “What Dreams May Come” and “Barney’s Great Adventure.” Of note on the music side are new product from Boyzone, Sheryl Crow and Elvis Costello with Burt Bacharach.

Polygram will announce its first-quarter results April 21. Polygram last issued a profit warning in 1996 when it announced a $90 million reorganization charge for the restructuring of its music operations.

(Adam Sandler in Los Angeles contributed to this report.)

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