Universal Music lags behind
Vivendi is rocking, but not to the sound of music division Universal Music. Earnings at the French conglom are being driven by vidgame arm Vivendi Games, paybox Canal Plus and telco unit SFR.Confirming its status as one of Europe’s healthiest media giants, Vivendi saw 2007 net profits of E2.83 billion ($4.30 billion), up 8.3% on 2006, the conglom announced Friday. Profits were slightly up on analysts’ already bullish expectations. Universal Music was the worst performing of Vivendi’s major divisions. But even its results were above par for the music industry. Already unveiled Jan. 31, total Vivendi revenues spiked 8% to $32.9 billion. Vivendi Games posted $274.8 million in operating profits, up an extraordinary 57% on 2006, off revenues of $1.5 billion. Blizzard Entertainment sales rocketed up 58% to $1.2 billion, driven by a 20% increase in the subscriber base to 10 million for online game franchise “World of Warcraft.” “The turnaround in Vivendi Games has clearly come through in calendar year 2007, which was a question mark at the beginning of the year,” said Paul Reynolds at Deutsche Bank. Canal Plus also returned from the dark side. At the start of 2007, France’s dominant pay TV operator closed a $743.8 million merger with rival TPS. Merger costs of $136.6 million hit Canal Plus’ books last year. Nevertheless, Canal Plus saw operating profits spike to $607.2 million from $113.9 million in 2006. Earnings increase was driven by increased revenues, sub growth and synergy savings. The last — including savings in channel production, distribution, technical and structural costs — reached $227.7 million alone in 2007. “The Canal Plus turnaround shows that if you get your head down, know what you’re doing and are genuinely committed to making things happen, you can deliver,” Reynolds said. Universal Music’s operating profit plunged 16.1% to $947.2 million off $7.4 billion sales, down 1.7% on 2006. Universal Music was hit by $78.9 million in restructuring costs, due mainly to the acquisitions of BMGP and Sanctuary. Yet, despite its bottom-line plunge, Universal Music significantly outperformed competitors, as Vivendi pointed out Friday. Vivendi predicts similar profit growth this year. Upside highlights include benefits from the Activision-Blizzard vidgame mega-merger, put through in December, and Canal Plus’ new deal for French soccer league matches. New four-year accord, announced early February, will see Canal Plus pay a reported $698.3 million a season starting in the second half of this year, saving Canal Plus an estimated $212.5 million per season.