Page 22 - 2012 Annual Report

VIVENDI l 2012 l Annual Report 22
GROUP PROFILE – BUSINESSES – LITIGATION – RISK FACTORS 1
1
SECTION 2 - BUSINESSES
UNIVERSAL MUSIC GROUP
2.2. UNIVERSAL MUSIC GROUP
2.2.1. Strategy/Positioning
With a market share of more than 30%, Universal Music Group (UMG)
is the world’s leading music company,(1) with top market positions in
recorded music, music publishing and merchandising.
The recorded music business discovers and develops recording artists and
then markets and promotes their music across a wide array of formats and
platforms. UMG continues to expand its participation in other operations
related to its recording artists, including brand rights management,
sponsorship and live events.
In the music publishing business, UMG discovers and develops
songwriters, and owns and administers copyrights to musical compositions
for use in recordings, public performances and related uses, such as films
and advertisements.
The merchandising business produces and sells artist and other branded
products via multiple sales points including fashion retail, concert touring
and the Internet.
(1) Source: Music & Copyright.
2.2.2. Recorded Music
UMG’s recorded music business holds market leading positions in most of
the world’s major music markets, including the United States, the United
Kingdom, France and Germany. The development of the digital market
and new innovative business models has enabled UMG to improve its
performance in the BRIC (Brazil, Russia, India and China) countries as well
as expand its presence into other emerging markets, such as the Middle
East and Eastern Europe.
In September 2012, UMG completed its acquisition of EMI Recorded
Music after having received final regulatory clearance. The conditions
for clearance in the European Economic Area required the disposal of
certain assets, including Parlophone and EMI France. On February 7, 2013,
Parlophone and EMI France were sold to Warner for €570 million.
The addition of EMI’s catalogue and artist roster will further serve to
increase UMG’s recorded music strength with the addition of such iconic
artists as The Beatles and the Beach Boys, as well as Robbie Williams’
catalogue and top-selling artists such as Katy Perry, Emeli Sandé and Lady
Antebellum.
UMG is not dependent on any particular artist or music trend, due to
its rich content portfolio and its direct representation in approximately
60 countries across the globe. This international reach, together with its
diverse range of labels in the major markets, ensures its participation in
the local music markets that are essential to its business.
UMG’s labels complement each other through their focus on different
genres and music segments, thereby mitigating the effect of changes
in consumer taste. UMG’s major recording labels include popular music
labels (such as Island Def Jam Music Group, Interscope Geffen A&M
Records, Universal Music Nashville, Mercury Records, Polydor and
Universal Motown Republic Group) and classical and jazz labels (such
as Decca, Deutsche Grammophone and Verve). These have been joined,
following EMI’s acquisition, by Virgin and Capitol.
In 2012, best-selling albums included titles from a wide range of artists,
including best-selling acts such as Taylor Swift, Justin Bieber, Maroon 5,
Rihanna and emerging talents such as Nicki Minaj, Lana Del Rey,
Carly Rae Jepsen and Gotye. Regional bestsellers included titles from
Girls Generation and Kara in Japan, Unheilig in Germany and Mylène
Farmer in France.
Sales from prior releases account for a significant part of UMG’s recorded
music revenues each year. UMG owns the most comprehensive catalogue
of recorded music in the world, with performers from the United States,
the United Kingdom and around the world, including, among others,
ABBA, Louis Armstrong, Dire Straits, Serge Gainsbourg, Johnny Hallyday,
Elton John, Herbert von Karajan, Edith Piaf, The Rolling Stones,
Michel Sardou and Frank Sinatra.
UMG markets its recordings and promotes its artists through advertising
and exposure in magazines, on radio and TV, via the Internet and mobile
phone devices and through point-of-sale material. Public appearances and
performances are also important elements in the marketing process, which
is carried out on a country-by-country basis although global priorities and
strategies for some artists are determined centrally. Television advertising
plays an important role in the marketing of compilations and new albums.
UMG is also very active in developing new sources of revenue, including
expanded rights arrangements, often described as ‘360° deals’, through
advertising and sponsorship agreements and participation in theatrical
and TV production. UMG’s Universal Brand Entertainment Experience
(u-bee) is now operating in 45 countries, developing multi-territory brand
partnerships with a diversified customer base such as Hewlett-Packard,
Credit Suisse, Shell and Hyundai.
UMG plays a leading role in the expansion of the digital music market
and continues to encourage and support innovation through partnerships
entered into with the leading players of the market, including Spotify,
iTunes, Google Music, Amazon, Deezer and Vevo. It has more than
420 online digital content partners worldwide.
UMG has outsourced the bulk of its manufacturing operations
and the management of its distribution activities to third parties.