Vivendi Resilient But Not Immune

Vivendi is a resilient company but not immune, according to chairman and chief exec Jean-Bernard Levy.

Commenting on the French media giant’s far-reaching businesses, particularly Universal Music Group, he said the future business model will focus on multiple sources of revenue, not just the CD.

“We used to be the major music company producing the records. Now we form many partnerships. MySpace is a very big destination for music fans, so we formed a partnership with them. We know the music industry will have multiple sources of revenues,” Levy explained.

“You cannot only rely on records to grow the business. What were once ancillary revenues or given away for free as marketing will now be part of the core business. Videos were considered just promotion and given away free to MTV, who made a lot of money from them.

“We say a music video is a piece of art by itself that can be monetized. We’re also looking at merchandising. And we look at advertising-based revenue from endorsements.

“Of course, the record is the majority of the revenues. We’ve doubled our publishing business. And download continues to grow. For some artists we have, the download business is bigger than their CD business.”

Levy said digital downloads account for 20 percent of worldwide sales and it’s growing “quite significantly,” having already reached 30 percent in the U.S.

He said Vivendi is well placed to deal with the economic downturn as 70 percent of revenues come from subscriptions.

“We have cellular phone service, Internet broadband service, pay TV and online games [such as World of Warcraft],” he said. “Less than 30 percent of our revenues are driven by purchases of things like DVDs, CDs and console-based games.

“I believe our businesses are going to be very resilient. Most people will keep their subscriptions.”

With respect to games and music, Levy said people will buy as long as the company creates hits. He said he believes the games business is still growing, but less quickly than a year ago.

“Nevertheless, we will have some indirect damage,” he said. “People who lose their jobs may not keep their subscriptions. We may be hurt by the increase in the number of jobless people. While we are very resilient, we are not immune.”

Levy said Vivendi’s growth will come from its ability to manage its existing businesses, rather than making more acquisitions.

Its records business has artists including Amy Winehouse, Elton John, Jay-Z, Metallica, U2 and The Rolling Stones. Its publishing business has grown with the euro 1.63 billion ($2.1 billion) acquisition of BMG Music Publishing.

In 2008, UMG paid £44.5 million, 20 pence cash per share, for the U.K.’s Sanctuary Music Group, which has agency, management and merchandising interests.

It also bought Big Life Music, the publishing company founded by Jazz Summers and Tim Parry in 1987.