Universal Music vows it`s not the same old song

Thu Oct 6, 2005 1:49 PM ET

By Jeffrey Goldfarb

LONDON (Reuters) - Universal Music, the world`s largest record company, said on Thursday it is transforming itself into a broader entertainment company that derives more revenue from untapped sources like advertising and apparel.

``New opportunities will emerge to monetize our assets and create new revenue streams,`` senior executives told about 40 analysts and investors in London. Slides from the presentation were posted on the company`s Web site.

Record sales have been hammered for five years as listeners illegally downloaded music for free while the industry scrambled to revamp its business model.

Sales have begun to level off as mobile phone ringtones, legal downloading and subscriptions offset the decline in CD sales. Universal Music said those businesses have swelled to 100 million euros in the first-half of 2005 from virtually nothing two years ago.

Record companies continue to pursue new untested ventures, like Universal`s deal earlier this week making its music available to mobile phone maker Motorola for a new wireless service, iRadio.

Total first-half revenue at Vivendi-owned Universal Music gained 9 percent from the year-ago period to 2.2 billion euros as profits nearly tripled to 142 million.

Universal Music, home to Mariah Carey, Eminem and the Black Eyed Peas, is hoping to take a piece of the $300 billion global advertising pie by selling music videos on demand over the Internet and on pay TV, Chairman Doug Morris and other senior executives said.

It already has deals in place with Yahoo, AOL and MSN.

The company also said without elaboration that it wants to ``tap into the enormous demand for free music, and generate revenue from those who can`t or won`t pay.``

Universal Music is responsible for about one of every four records sold around the world.

It said it is expanding its relationship with artists, pointing to cosmetics and clothing lines tied to new pop group Pussycat Dolls and the forthcoming biopic ``Get Rich or Die Tryin`` starring its top-selling rapper 50 Cent.

``Universal Music is in the business of creating global stars and brands,`` it said. ``We are now beginning to expand our relationships with our artists and share in the multiple revenue streams that accrue from their success.``

The Universal executives also made the point that all the new revenue streams they are chasing still hinge on the company`s ability to sign and nurture singers and groups that consumers want to hear.