Vivendi U uploads MP3 for $370 mil

Purchase gives conglom online know-how, Messier sez

Just months after Universal Music Group beat MP3.com to a pulp in federal court over copyright infringement, UMG parent Vivendi Universal has agreed to buy the embattled Netco in a cash and stock deal worth $372 million.

Under the terms of the pact, approved unanimously by MP3’s board of directors, the music portal’s shareholders have a choice between $5 per share in cash or $5 in Vivendi U’s American depository receipts for each MP3 share. MP3’s Nasdaq-listed stock closed Friday at $3.01, down from a year-high of $22.50 last May.

The acquisition of MP3, best known for offering new artists a venue for distributing their music in digital form over the Net, will give the conglom added tools and technical know-how for selling its own wares online, said chairman Jean-Marie Messier.

“Their engineering and digital expertise will be a tremendous advantage for Vivendi Universal, especially in the digital distribution of all Vivendi Universal content and the creation of common technology platforms,” Messier said.

Deal is the latest in a string of new online ventures and acquisitions for the U.S.-French media giant as it solidifies its plans to tackle music distribution in cyberspace. Last March, Vivendi U agreed to purchase the 50% of music site GetMusic that it didn’t already own from BMG Entertainment, with an eye toward folding it in with Farmclub.com, UMG’s site for up-and-coming artists. Then in April, the conglom revved up its plans for Duet, a year-old online music subscription venture with Sony Music, by announcing that the service would bow by the end of summer and be marketed through uber-portal Yahoo!

Also last month, UMG picked up troubled music portal EMusic.com for just over $23 million. Company, which sold music downloads from more than 150,000 mostly independent labels, had seen its stock price plummet to a low of 16¢ as it fought an uphill battle against free-music network Napster.

One less indie

Until Sunday, MP3 had been one of the few remaining independents left in the online music space, and the relationship between the Netco and Vivendi U had been far from harmonious.

UMG, along with the other four major labels, sued the company for copyright infringement over its My.MP3.com digital locker service. The other four majors settled for a reported $20 million each (plus another $30 million to placate music publishing orgs); U was the lone holdout, eventually winning a judgment worth $53.4 million.

The conglom held out an olive branch, however, giving MP3 a license to use its content in My.MP3 and purchasing warrants to take a small minority stake in the company.

Liability uncertain

It was not immediately clear whether Vivendi U will assume liability for the remaining copyright suits still pending against MP3, including one filed by Jive Records parent Zomba Music.

Netco will continue operations as a standalone business, even as it integrates with Vivendi U’s existing online music properties. MP3 topper Michael Robertson will act as a special adviser to Messier on digital distribution issues.

The music business is one of the surprisingly few sectors that’s seen lively consolidation in the wake of the dot.com meltdown, as traditional players snap up online upstarts for bargain basement prices. Last year, Bertelsmann’s BMG bought a big chunk of Napster, another once high-flying file sharing service that’s been flattened by copyright infringement lawsuits.

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