Page 52 - 2012 Annual Report

VIVENDI l 2012 l Annual Report 52
GROUP PROFILE – BUSINESSES – LITIGATION – RISK FACTORS 1
1
SECTION 4 - RISK FACTORS
RISKS ASSOCIATED WITH PIRACY AND COUNTERFEITING
Over the past few years, the reduction in the cost of computer and
electronic equipment and associated technologies has facilitated the
unauthorized reproduction of music and audiovisual works and games.
At the same time, increased access to high-speed Internet connections
has enabled, and continues to enable, computer, smartphone and tablet
computer users to share such works more easily (and in greater number),
without the copyright holder’s authorization and without paying royalties.
Vivendi is dependent on the decisions of public or administrative
authorities and their determination to find effective means to combat
piracy. Persistent difficulties in passing and applying suitable legislation
or in enforcing court rulings, particularly in certain regions of the world
where piracy is endemic, constitute a threat to Vivendi’s businesses,
which depend heavily on the intellectual property rights owned by or
licensed to the Group.
Section 2 of this chapter contains a detailed analysis of piracy issues and
measures taken by each of the Group’s business units to combat it.
RISKS ASSOCIATED WITH INFRASTRUCTURE, SERVICE PLATFORMS
AND DATA PROTECTION
The infrastructure of some of the Group’s operating units may be affected
by damage or interruption caused to the service provided to customers
or subscribers as a result of hardware or software failure, human error,
service provider failure, equipment sabotage or hacking (physical or
electronic) into operating systems or critical software, and this may have
an impact on their business.
The security of infrastructures, information systems and service platforms
is an ongoing concern at Vivendi, as is the safeguarding of access to,
and privacy and protection of, transmitted personal data.
RISKS ASSOCIATED WITH INTENSIFIED COMMERCIAL
AND TECHNICAL COMPETITION
Vivendi’s businesses face strong competition, which may intensify in
the near future due to the trend towards industry concentration among
existing companies or the entry of new competitors in the relevant
markets. Growing competition exerts considerable pressure on Vivendi,
which may lead to a loss in market share if Vivendi is no longer able to
supply products and services that are sufficiently competitive in terms of
price and quality.
In particular, Vivendi’s development depends on its ability to adapt the
products and services it offers to the requirements of increasingly
demanding customers, in industries distinguished by rapid technological
developments. The need for Vivendi to respond to such requirements
and advances, or even in some cases to anticipate them, may lead to the
Group making substantial investment without any assurance that the new
products and services developed and offered will not become obsolete
within a short period of time.
RISKS ASSOCIATED WITH THE LACK OF COMMERCIAL SUCCESS
OF RECORDED MUSIC, FILMS AND VIDEO GAMES PRODUCED,
PUBLISHED OR DISTRIBUTED BY THE GROUP
The production and distribution of musical and audiovisual content and
video games publishing represent a substantial proportion of Vivendi’s
revenues. The commercial success of these works is dependent upon
the public’s response, which may not always be predicted, the existence
and success of competing entertainment offers, and general economic
circumstances.
Finally, when these operations are based on content provided by third
parties, no assurance can be given that such third parties will always
agree to transfer their rights for various communication media, under
financial and commercial terms acceptable to Vivendi.
CONDUCTING OPERATIONS IN VARIOUS COUNTRIES IS SUBJECT
TO ADDITIONAL RISKS
Vivendi conducts its business in various markets throughout the world. The
main risks associated with business being conducted on an international
scale are as follows:
✱ the local economic and political situation;
✱ exchange rate fluctuations;
✱ restrictions on capital repatriation;
✱ unexpected changes in the regulatory environment;
✱ the various tax systems that may have an adverse effect on Vivendi’s
operating results or cash flow, and in particular regulations relating to
transfer costs and the withholding tax on the repatriation of funds; and
✱ tariff barriers, customs duties, export controls and other trade barriers.
Vivendi may not be able to protect itself against such risks.
POTENTIAL HEALTH RISKS POSED BY NETWORKS, MOBILE PHONES
OR WI-FI TERMINALS
Over the past few years, concerns have been expressed on an international
level as to the potential risks posed to human health by electromagnetic
radiation from mobile phones and mobile transmission sites. Vivendi is not
currently aware of any tangible evidence that demonstrates the existence
of risks to human health associated with the use of mobile phones, the
emission of radio waves or electromagnetic fields.
Nevertheless, the perception of such risks by the public may have a
material negative impact on Vivendi’s results or financial position,
particularly if legal claims were brought against the company or if
regulations resulted in additional costs related to compliance with new
standards.
Risks Associated with the Group’s Operations