Vivendi is keeping an eye on U

Fourtou says focus should be on profits, not fat

Vivendi Universal held its hotly anticipated board meeting last week, followed by a 90-minute press conference — both conducted almost exclusively in French.

But the message was in a Universal language: The Franco-American linkup is tout sweet as far as Vivendi is concerned.

Since the spring, les rumors du jour in Hollywood have centered on Universal: that Vivendi would hold a fire sale, that its production pace would slow, that there would be huge cutbacks, etc.

Most of the naysaying was put to rest at the Sept. 25 meet, held at Viv U headquarters near the Arc de Triomphe in Paris.

Chairman Jean-Rene Fourtou called Universal and Canal Plus “two strong brands” and said that with its remaining U.S. and French media assets, the group will still be “first or second in Europe and third or fourth in the world.”

A sale of U Pictures is pretty much out of the question. Fourtou acknowledged that market volatility and a slump in advertising means media and entertainment holdings wouldn’t fetch appropriate prices.

Giving a rather reluctant thumbs up to showbiz, Fourtou told reporters that Viv U is “an entertainment and media group — like it or not.”

But it wasn’t all bleu skies. Some serious renegotiation would be in the cards between Fourtou and Barry Diller. One objective might be to enhance the stakes of Diller and his USA Interactive in Vivendi, in return for Diller waiving some of the terms of the highly restrictive deal he’d initially struck with the French. That deal tied the hands of Vivendi in its efforts to bring in yet other partners.

Fourtou warned the Hollywood studio to work more closely with its French parent, focus on profits and cut the fat.

Fourtou spoke darkly of executives “who are more attentive to their own income than they are to other things. It’s better to have their income be geared to shareholders.”

Still, he noted, “Los Angeles has never been so productive as it is now,” Fourtou said.

He’s right.

It seems clear that corporate jitters have hardly affected the performance of Universal Pictures. After a low-key summer, the much-anticipated fall releases “Red Dragon” (see review, page 24) and Eminem starrer “8 Mile” could boost the 2002 slate to a healthy year-end tally.

It remains to be seen if U can match last year’s heady $956 million domestic haul. But the studio has cleared $900 million in each of the past three years under U Pictures chair Stacey Snider and U Studios chief operating officer-prexy Ron Meyer.

Hence, the mood remains upbeat, even though it faces the curious lack of a December release.

U’s ’03 slate is jammed with mega titles. There are new tentpoles “The Hulk” and “The Cat in the Hat” to go with homegrown franchise entries “The Fast and the Furious 2” and “American Pie 3.”

Heading into October, the studio’s domestic total for 2002 was $622 million. More than half of that came from three pics: Oscar winner “A Beautiful Mind,” pre-summer tentpole “The Scorpion King” and spy thriller “The Bourne Identity,” which showed longevity in a summer of legless biggies. Mixed in with U’s hits have been less successful outings like “Dragonfly” or the refashioned “E.T. The Extra-Terrestrial.”

One key figure in the executive suite remains Vivendi Universal Entertainment topper Diller.

Fourtou says he values Diller’s expertise and passion for the industry. “We like one another. We say so twice a day,” Fourtou told reporters.

John Malone “also phones me. He also likes me and wants to buy everything.”

As for selling off its various divisions, Fourtou said Viv U’s first priority will be the mammoth sale of  €12 billion ($11.7 billion) worth of assets in 18 months, with the $4.9 billion publishing division as the only core biz put on the block for now.

Also ready to go are stakes in a constellation of “exotic” noncore businesses acquired during Jean-Marie Messier’s chaotic stint as topper. Fourtou hinted Viv U may unload its 40% stake in Vivendi Environment but promised not to sell shares on the open market.

Meanwhile, a sale of Universal Music before 2005 would entail a hefty tax bill in Canada.

Fourtou announced the sale of the money-losing Italian satellite platform Telepiu and Canal Plus Technologies. He hedged on the future of Viv U’s stake in Gallic telco Cegetel.

(Jonathan Bing and Timothy M. Gray contributed to this report.)

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