October 6, 2005
Universal Music vows it’s not the same old song
By Jeffrey Goldfarb
LONDON (Reuters) - Universal Music, the world's largest
record company, said on Thursday it is transforming itself into
a broader entertainment company that derives more revenue from
untapped sources like advertising and apparel.
"New opportunities will emerge to monazite our assets and
create new revenue streams," senior executives told about 40
analysts and investors in London. Slides from the presentation
were posted on the company's Web site.
Record sales have been hammered for five years as listeners
illegally downloaded music for free while the industry
scrambled to revamp its business model.
Sales have begun to level off as mobile phone ringtones,
legal downloading and subscriptions offset the decline in CD
sales. Universal Music said those businesses have swelled to
100 million euros in the first-half of 2005 from virtually
nothing two years ago.
Record companies continue to pursue new untested ventures,
like Universal's deal earlier this week making its music
available to mobile phone maker Motorola for a new wireless
Total first-half revenue at Vivendi-owned Universal Music
gained 9 percent from the year-ago period to 2.2 billion euros
as profits nearly tripled to 142 million.
Universal Music, home to Mariah Carey, Eminem and the Black
Eyed Peas, is hoping to take a piece of the $300 billion global
advertising pie by selling music videos on demand over the
Internet and on pay TV, Chairman Doug Morris and other senior
It already has deals in place with Yahoo, AOL and MSN.
The company also said without elaboration that it wants to
"tap into the enormous demand for free music, and generate
revenue from those who can't or won't pay."
Universal Music is responsible for about one of every four
records sold around the world.
It said it is expanding its relationship with artists,
pointing to cosmetics and clothing lines tied to new pop group
Pussycat Dolls and the forthcoming biopic "Get Rich or Die
Tryin" starring its top-selling rapper 50 Cent.
"Universal Music is in the business of creating global
stars and brands," it said. "We are now beginning to expand our
relationships with our artists and share in the multiple
revenue streams that accrue from their success."
The Universal executives also made the point that all the
new revenue streams they are chasing still hinge on the
company's ability to sign and nurture singers and groups that
consumers want to hear.