Universal Music's Parent Merges With French Company

Deal involving Eminem's, Pavarotti's label will combine top content with digital distribution, new partners say.

The Seagram Company Ltd. — parent of the world's largest record company, Universal Music Group — is merging with a French utilities company, the companies announced Tuesday (June 20).

The deal will combine the content-rich Seagram — whose entertainment assets include rapper Eminem, opera singer Luciano Pavarotti, Elton John, the film "Gladiator," and the TV series "Law & Order" — with Vivendi, whose holdings include the French telecommunications-and-broadcast company Canal Plus.

"This is the first company to combine premier global and local content with next-generation digital distribution," Jean-Marie Messier, who will run Vivendi Universal, said at a Paris teleconference Tuesday.

"We will have premium-branded global and local content in music, film, sports, education, games, theme parks and industry verticals like health care, education and recreation," Messier said. "And we will be able to offer our customers a powerful array of seamless and integrated services across multiple digital and analog formats."

The merger comes on the heels of the impending America Online–Time Warner merger, announced last year, and further unites the worlds of old and new media.

A Sign Of Things To Come

"This merger/acquisition was very inspired by the AOL–Time Warner ;Time Warner deal," Mark Mooradian, an industry analyst for Jupiter Communications, said on Monday. "It's no coincidence that you now have two broadband-communications-directed companies making music their focus."

Vivendi has a stake in AOL France as well as controlling France's No. 2 telecom operator, Cegetel, the French film company Pathe and a piece of media mogul Rupert Murdoch's BSkyB satellite network. It also owns the Havas Group, the No. 1 publisher of PC-based games in the United States.

"I think you will start to see digital initiatives moving more quickly than in the last few years," Mooradian said.

Seagram's Universal Studios Group is a huge media conglomerate that includes film and television studios, theme parks, television, home video, pay-per-view channels, concert venues, record labels and music publishing businesses.

Universal Music Group was created when Seagram combined its record company, MCA/Universal, with rival Polygram in 1998. Previous Polygram owner Royal Philips Electronics has an 11 percent share of Seagram, which in turn will have a stake in Vivendi Universal. Universal's labels include Interscope, Geffen, Decca, Deutsche Grammaphone, Def Jam, MCA Nashville, Island, Motown and Verve.

Acts on those labels range from classical artists Pavarotti and Andrea Bocelli, to rock stars U2, Beck and Elton John, country stars Vince Gill and Lyle Lovett, jazz artists Roy Hargrove and George Benson and rappers Eminem and Dr. Dre. Recent and upcoming film releases from Universal Pictures include "The Nutty Professor II," "U-571" and "Gladiator." Television programs include "Xena, Warrior Princess," "Law & Order" and talk shows from Jerry Springer, Sally Jessy Raphael and Maury Povich. Universal also has a 42 percent equity stake in USA Networks, which includes USA Network, Sci-Fi Channel, Home Shopping Network, TicketMaster, Hotel Reservations Network, Gramercy Pictures and October Films.

Beverage Holdings To Be Unloaded

For nearly 70 years, Seagram was best known for its beverage product line, including Seagrams 7, Glenlivit and Chivas Regal Scotch whiskies, Absolut vodka, Mumm Cordon Rouge champagne and Martell cognac. It also owns several wine brands, such as Almaden, and Godiva chocolates. Seagram is expected to unload its beverage holdings in the deal.

When Edgar Bronfman Jr. took over the company about five years ago, he began turning it into a media concern that culminated with the creation of acquisition of the Universal Group. "The formation of Vivendi Universal is both the beginning of a new era of opportunity and the culmination of Seagram's transformation into a leading force in the global media-and-entertainment industry," Bronfman said in the joint statement. Bronfman will serve as vice chairman, with responsibility for the company's music and Internet activities. Recently, Vivendi, which began as a water utility company, signed a deal with Vodafone to create a new European Internet portal, Vizzavi. Vizzavi will be the default portal for 80 million mobile and interactive TV subscribers, according to a company press release.

Vivendi has a 49 percent stake in Canal Plus, which has a pay-TV business in more than 13 countries, a film studio, plus satellite and interactive TV interests, all of which are expected to be absorbed by the new entity.

"The strength of the assets in the Vivendi, Universal, Canal Plus combination will enable us to be the leader in the greatest adventure of the 21st century: delivering entertainment, culture and information to an ever-increasing part of mankind," Canal Plus Chairman Pierre Lescure said in a statement. "In the home — on TV or PC — and out of the home — at the cinema, on a mobile, or on a PDA — our outstanding combination of creative and premium content can be delivered seamlessly to our customers and subscribers." The combined venture would create a company with revenues of $65 billion and a market capitalization of $100 billion, according to a BBC news report.