French media conglomerate Vivendi this morning reported financial results, posting a decline in full-year profit but beating estimates because the net loss was much narrower than expected. You can read more analysis of the media and entertainment giant’s performance elsewhere, but there was a particular passage in the press release regarding Vivendi’s music subsidiary, Universal Music Group, that caught my eye.
UMG, the world’s largest music company with artists like U2, Amy Winehouse, Lady Gaga, Taylor Swift, Black Eyed Peas, Rihanna, Eminem, Lil Wayne under contract, as expected finds its revenue from physical product sales (CDs) in a seemingly unstoppable decline. Last year, the company’s revenues were €4,363 million, a 6.2% decrease compared to 2008.
Still, Universal Music Group’s digital sales grew 8.4% in 2009, which the company attributed to strong growth in online sales yet “tempered by softening demand for mobile products in the United States and Japan”.
UMG says it will “continue to encourage and support innovation”, citing Spotify’s iPhone application and MusicStation’s presence on the Android Market as examples. Universal is also a major shareholder of VEVO, a service launched in December, 2009 that quickly rose to become the number 1 music property in the United States.
Universal Music Group recently appointed Lucian Grainge as Chief Executive Officer of the company, succeeding Doug Morris who remained as Chairman. When the promotion was announced, Jean-Bernard Levy, chairman of the Vivendi Management Board, said:
“I am delighted that Lucian Grainge has agreed to move to New York to take on the Chief Executive role. His track record speaks for itself, finding stars, growing revenues and building new business models. He has the right combination of experience and innovation to take UMG forward as the migration into the digital era accelerates.”
Do you think Universal Music Group can offset the decline in revenue from physical product sales with a continued increase in digital sales revenue in the foreseeable future?