Vivendi Universal Regroups With Web-Based Properties ‘People had the idea the Internet was an R & D; lab and they could do anything they wanted’ Robin Richards By CARLOS MARTINEZ Staff Reporter After years of struggling with a disjointed group of Internet sites, Vivendi Universal S.A. says it’s ready to develop an ambitious consolidation plan unifying all of its interactive and Web-related properties into what it believes could be a model for future commercial Web sites. Last month, Vivendi consolidated a number of its online units: its MP3 music service, EMusic.com, GetMusic.com, RollingStone.com, InsideSessions, the Flipside Network and Education.com, along with its new MP4.com video Web site and its two gaming sites, Iwin.com and virtualvegas.com. The company’s consolidation plan comes after losses in its Internet-related properties increased to $180.4 million in 2000 from $32.5 million in 1999, according to company filings. The hope is that it will be easier to link Web-based properties with more traditional media, perhaps even encouraging some advertisers to be more creative in the way they use Vivendi Universal products and services. “By bringing together these units, we hope to better market them and create greater revenue through advertising,” said Vivendi Universal Net USA President Robin D. Richards, who is based in Studio City. “People had the idea that the Internet was an R & D; lab and they could do anything they wanted to do, but that’s not really how it works,” he said. ” Now we’ll be able to provide a centralized technological infrastructure for our other content businesses like film, music, games and education.” Richards said he plans to develop online games for Vivendi’s Web sites that will incorporate advertisers’ brands and products into the game. “It’s much better than putting a 30-second ad on television and much less expensive,” said Richards, who declined to say how much such an advertising program would cost. He claims that, so far, the proposed online games that advertise products have been well received by advertisers who are looking for a better return than they have seen from other forms of online advertising. Others are not as convinced. It’s unclear how well that strategy will work for advertisers, said Michael Russell, an analyst with Morgan Stanley Dean Witter & Co. Russell said many major companies still do not believe the Internet is an effective way to advertise. Richards, however, is counting on the estimated 36.2 million monthly visitors to his Web sites to push its online advertising strategy. Attracting advertisers, however, is just part of the new Web strategy. It will be used to market Vivendi’s own record labels and artists. Christopher Dixon, an analyst with UBS Warburg, said the company’s move is in keeping with its plans to streamline its overall operations and cut costs. Already, he said, Vivendi Universal’s cost-cutting in its theme parks and elsewhere have helped push its overall earnings. For the quarter ending Sept. 30, the company reported $1.3 billion in net income on revenue of $6.6 billion, compared to $1.26 billion in net income on revenue of $6.5 billion a year earlier. The company’s Web consolidation plan and its recent proposed acquisition of USA Networks is good reason for optimism, said UBS Warburg’s Dixon. He said the company is poised to improve its earnings in 2002 as it continues to reorganize and eliminate waste. The company’s MP3 service will likely break even next year, he said, though he was uncertain about its other Web-related services. Already, the company has split MP3 into two units, one developing its file-sharing technology and the subscription-based online music service. That unit faces tough competition from EMI, Warner Music and Bertelsmann Music Group, which have also launched their own subscription-based music services.
