Net piracy rocks Universal

By ROSS TIEMAN
Updated:

 

THE weakness of the global music industry, linked mostly to illicit online music swapping, meant sales at Universal Music Group, part of French media conglomerate Vivendi Universal, slumped by a quarter in the first half, plunging the group into the red.

Restructuring led Vivendi to reveal losses at Universal Music of e42m (£29m) in the half-year to 30 June against profits of e169m in the same months of last year, with sales down to about e2.17bn.

The weak performance came despite eight million copies of rapper 50 Cent's album being sold as well as strong carry-over sales from Russian teenagers T.AT.U and Eminem, and a catalogue of stars ranging from Sting to Luciano Pavarotti.

In an attempt to combat piracy, Universal has broken industry ranks and announced plans for massive cuts in US CD prices in the fourth quarter - a move that the group warned may have 'negative implications on near-term results'.

Partly because of the dismal performance of the music business, the media division of Vivendi Universal as a whole was only marginally profitable in the first half, despite sales of e8bn.

After more than a year of restructuring by rescue chairman Jean-Rene Fourtou, the group recorded a net first-half loss of e632m, down from losses of e12.3bn.

Operating profits, however, rose 20% to e1.68bn, ahead of expectations, but group debt, at e13.7bn, rose e700m after Vivendi spent e4bn to lift its stake in French number two phone operator Cegetel to 70%.

That move countered the ambitions of UK mobile phone operator Vodafone to acquire it.

With Vivendi's US entertainment business poised for merger with General Electric's NBC, Fourtou is now contemplating a demerger of Vivendi's media and telephony interests. That could open the way for Vodafone to gain control of Cegetel, valued at about e15bn.

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