NEW YORK — “Erin Brockovich” and “Gladiator” led a film turnaround while rapper Eminem hit high notes for the music division to buoy the financial results of Universal parent Seagram, as CEO Edgar Bronfman Jr. anticipated that the company’s merger with Vivendi will close in November.
By late August the partners will have completed all required regulatory filings in the U.S., Europe and Canada. Stateside, a statutory waiting period has expired without any requests for additional information, Bronfman told a group of analysts during a conference call Thursday, reflecting tacit approval from antitrust authorities.
Seagram, Vivendi and Canal Plus are developing a strong integration plan, he added, with 22 teams in place to examine the partners’ various businesses to boost revenue and cut costs. Bronfman and Seagram chief financial officer Brian Mulligan promised to give the financial community a full rundown on the merger, with plenty of numbers, at an investors’ meeting scheduled for October.
Bronfman also noted that Universal Pictures is stepping up the pace on certain projects amid the threat of a strike by actors and writers next summer. That means the studio may see higher-than-expected cash outlays this fiscal year.
Seagram posted $40 million in net income for the fiscal year ended June 30, down from $686 million the year before. The earlier figure, however, was distorted by a one-time gain of nearly $1.1 billion from the sale of Seagram’s Tropicana unit. On a pro forma basis, to account for sales and changes in assets, Seagram lost $208 million in 1999 compared with its $40 million profit in fiscal 2000.
Revenue rose 27% to $15.7 billion for the year.
Beating Street forecast
In the fourth quarter, a net loss of $128 million was wider than a $53 million loss the year before but still beat Wall Street’s expectations. Revenue for the three months rose 11% to $3.9 billion.
The film division has turned profitable. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $5 million for the quarter compared with a loss of $69 million the year before, despite an unspecified writedown for flop “The Adventures of Rocky & Bullwinkle.” For the full year, losses narrowed to $61 million from $136 million. “Erin Brockovich,” jointly owned by Columbia Pictures; “Gladiator,” half-owned by DreamWorks; and “U-571” fueled the turnaround.
Eddie Murphy’s “Nutty Professor II: The Klumps” opened strong in July, and Bronfman praised the fall/winter lineup, which includes “Meet the Parents,” “The Watcher,” “Dr. Seuss’ How the Grinch Stole Christmas” and “Family Man.”
New specialty film division Universal Focus will roll out Working Title’s “Billy Elliot” in October.
Bronfman called the motion picture biz highly variable — certainly Universal has taken some lumps. But he credited management — namely, Universal Studios president and chief operating officer Ron Meyer and Universal Pictures chairman Stacey Snider — for an understanding of the market and an eye on costs that fueled the recent upswing.
On the strike issue, Bronfman said, “I think everyone in Hollywood is conscious that we could be coming up to a strike” that the studios are eager to avoid, but not at any price. He said U may be fast-tracking some projects but won’t be rushed into “spending huge amounts of money” on talent or scripts that aren’t appropriate. The studio now has seven films in various stages of production, he said, including “The Mummy 2” and “Jurassic Park 3.”
U is also planning to take a non-cash charge in the current fiscal year to implement new film accounting rules, but execs weren’t ready to give a number yet. They promised it will be well below the steepest charges seen elsewhere. Sony, for instance, took a writedown of nearly $1 billion.
Seagram also reported blow-away results for Universal Music Group, with more than $1 billion in EBITDA for the year. In the quarter, cash flow jumped 56% to $217 million and revenue rose 7% to $1.42 billion. Key artists for the world’s biggest music group include Eminem, Bon Jovi, Sisqo, No Doubt, Sting, Hanson and Dr. Dre. New releases include albums from 98 Degrees, Boyz II Men and Andrea Bocelli.
He said growth will continue, perhaps less dramatically, and that Universal’s position in Japan, the world’s second largest music market, is improving.
Early this month, Universal announced a trial for Bluematter, a new digital music product enabling commercial downloads of music from the Internet. Bronfman said the technological challenges of a system that allows consumers to legally purchase and download music online are immense, but that the company and the industry are moving forward. He expects to see “millions, if not tens of millions” of tracks sold legally by the end of the year.
Bronfman said Universal expects to break even on its international cable business, including nets 13th Street and Studio Universal, in about 18 months — far sooner than expected.
Recreation cash flow jumped 41% for the year to $188 million, and revenue firmed 5.6% to $862 million. Stronger numbers were partly due to higher management fees from Islands of Adventure at Universal Orlando, lower overhead and vidgame sales. Universal Studios Japan in Osaka is slated to open next spring.
Wine and spirits, which houses brands like Absolut Vodka, Chivas Regal and Crown Royal, is up for sale as part of Seagram’s merger with Vivendi. Bronfman said the company is talking with advisers on how best to dispose of its historic business. Possible suitors include other Bronfmans who’d like to keep the Seagram’s trademark in the family.
Revenue and cash flow at that biz both rose about 6% for the year to $5.1 billion and $684 million, respectively.