A dearth of chart topping hits from the likes of U2, Bon Jovi and Eminem hit music sales at Vivendi Universal last year, resulting in a 21 per cent fall in CD revenues from the world's biggest record company.
Vivendi, which owns Universal Music and Universal Entertainment, the film and TV business, announced yesterday that group sales crashed 56 per cent in 2003 to €25.4bn (£17.4bn).
Music was one of the worst hit areas for Vivendi, along with its computer games business, Universal Entertainment Games, which suffered a 28 per cent fall in sales to €571m.
The sharp fall in group revenues reflects the sale of half of Vivendi's stake in Veolia Environment, the water company which originally funded the group's ill-fated expansion into music and entertainment under Jean-Marie Messier, the former Vivendi chief executive.
Vivendi, which is now run by Jean-René Fourtou, sold down its Veolia stake to 20 per cent in December 2002 and therefore no longer includes revenues from the utility business in its financial statements. Excluding Veolia, Vivendi's ongoing operations, which also include the Canal Plus television network and SFR Cegetel, the telecoms business, saw an 8 per cent decline in total group sales to €25.3bn. Stripping out the effects of a weak dollar, the company's sales fell 3 per cent.
Although its telecoms business rang up a 6 per cent increase in revenues to €9bn, the poor performance of its music and computer gaming businesses more than wiped out these gains.
Universal Music sales were down 21 per cent to €4.9bn with the company blaming a weak market for music sales globally last year and a shortage of chart topping releases from its superstar acts. Universal is the world's leading music company and despite a poor 2003, it may enjoy a better 2004 after new figures yesterday showed that in January album sales in the United States improved 10.4 per cent in volume.
One bright spot for Vivendi was a confident declaration that the company's formerly near ruinous debt levels are now under control. It said net debt should come in at €12bn for 2003 and would be down to €5bn by the end of this year. In July 2002, when M. Messier was ousted in a bitter boardroom power struggle, net debt stood at €35bn.
A series of disposals, including the Veolia Environment stake, and aggressive cost cutting by the company have brought debt levels down.
Vivendi is also is in the process of merging Universal Entertainment, the film and TV business, with NBC, owned by GE Capital, resulting in a business in which Vivendi will have a 20 per cent stake.
Yesterday, it said 2003 had witnessed a significant growth in cash flow from ongoing operations and that the year was expected to mark a return to profits when the company announced its full-year figures in a few weeks' time, even though sales were sharply down.
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