Revs jump 30%; music hits sour note
NEW YORK — Universal’s recent hot run at the box office couldn’t staunch the red ink at parent Seagram Co., which posted a net loss of $129 million in the fourth quarter ended in June.
Still, the number roundly beat Wall Street estimates and gave Seagram stock a nice boost in a down market Thursday.
For the full fiscal year ended June 30, the company earned $686 million, including a $1.1 billion gain from the sale of its Tropicana juice unit to Pepsi. The proceeds helped pay for Seagram’s $10.2 billion purchase of music giant Polygram in December. Bulked up with its acquisition, Seagram’s annual revenue jumped 30% to $12.3 billion.
Lackluster early films
Filmed entertainment swung to an operating loss of $206 million from a profit of $229 million in fiscal 1998, due mainly to poor showings by films released early in the year including “Babe: Pig in the City” and “Meet Joe Black.” Strong numbers from newer films like “The Mummy,” “Notting Hill,” “American Pie” and “Bowfinger” arrived too late to make a significant dent.
Revenue for filmed entertainment rose 5% to $2.9 billion for the year.
“Our film business is in the process of a turnaround. We have a new management team in place (and) are seeking to enhance returns by taking capital out of the business,” Seagram CEO Edgar Bronfman Jr. said in a statement, noting, “It will be several quarters before our film business returns to profitability.”
Dismal B.O. last year prompted some major housecleaning at U, with Universal Studios chairman Frank Biondi departing, followed soon after by pictures chief Casey Silver, who was replaced by Brian Mulligan and Stacey Snider as co-heads. The Universal Studios arm also includes theme parks among other businesses.
Bronfman said U’s current healthy film run should continue with upcoming releases “For the Love of the Game,” with Kevin Costner; “End of Days,” starring Arnold Schwarzenegger; and Jim Carrey’s Andy Kaufman biopic “Man on the Moon.”
Sour note in music
In music, now a bigger business for Seagram than film, operating losses for the year increased to $126 million from $44 million, while revenue soared to $3.8 billion from $1.5 billion in the year-to-year period.
For the quarter, revenue slipped from the year before due, Seagram said, to unfavorable exchange rates, a reduction in artist rosters, fewer singles and video releases, and soft market conditions in Japan, Germany and Brazil. But quarterly cash flow was higher, reflecting cost savings from combining Polygram with Universal Music.
Seagram also cited strong album sales from Shania Twain, the Cranberries, Andrea Bocelli and Limp Bizkit.
Bronfman said his company is “spending aggressively” in testing the digital download of music, digitizing its music catalog and building GetMusic, an Internet venture with BMG Entertainment. The company also is investing in the eCAT electronic commerce business and building out international cable channels to leverage U’s film and TV library.
Total investment of about $30 million in fiscal 1999 will balloon to about $100 million in the current fiscal year.
Revenue from recreation and other businesses rose 18% to $818 million, and operating income nearly doubled to $45 million. Seagram noted higher management fees from Universal Studios Escape and Universal Studios Port Aventura and a “milestone fee” related to construction of Universal Studios Japan. U also opened Universal Studios Islands of Adventure in May in Orlando, Fla.
Seagram’s spirits and wine division posted revenue of $4.8 billion and operating income of $552 million for the year.
Seagram shares closed up $3.50 at $53.62 on Thursday.