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Vivendi — Vivendi Universal — Investor Presentation (April 2004)
51 slides from Vivendi's investor presentation, Apr 28, 2004
Slide 1: Vivendi Universal Investor Meetings UMG Presentation April 2004
Vivendi Universal Investor Meetings UMG Presentation April 2004
Slide 2: Universal Music Group Presenters
Universal Music Group Doug Morris - Chairman (New York) Zach Horowitz - President & COO (Los Angeles) Jorgen Larsen - Chairman UMI (London) Nick Henny - Vice Chairman (New York)
Slide 3: Important Disclaimer
Universal Music Group Important Disclaimer This presentation contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the
Slide 4: Universal Music Group
Universal Music Group World's largest recording company World's third largest music publishing company Companies in 49 countries, represented in 71 About 10,000 employees 1999 2000 2001 2002 2003 UMG 0.217 0.231 0.237 0.259 0.234 Sony 0.17 0.144 0.146 0.17 0.148 WMG 0.114 0.121 0.119 0.141 0.135 EMI
Slide 5: eC} Ka
eC} Ka \\\ MOTOWN” UNIVERSAL MUSIC GROUP
Slide 6: Product Reel
Product Reel ~ ™_ - VIVENDI UNIVERSAE UNIVERSAL MUSIC GROUP UNIVERSAL
Slide 7: Global Music Market
Global Music Market 2001 2002 2003E 2004E 2005E 2006E 2007E 2008E 2009E 2010E Physical 34653 32226 29628 29035 28113 26752 25587 24603 23617 22861 Digital 0.17 15 70 192 464 934 1722 2906 4617 6609 Source: Enders Analysis Ltd. Retail Sales $,millions
Slide 8: The Industry is Turning the Corner
The Industry is Turning the Corner The promise of on-line music has become reality Anti piracy initiatives are showing promise Physical sales declines are at least slowing - - picking up in the US
Slide 9: Major Sellers
Major Sellers (mm units) Eminem 13.9 Shania Twain 8.1 Nelly 7.9 8 Mile OST 6.1 U2 5.2 Ashanti 4.3 Nirvana 3.8 Enrique Iglesias 3.8 Bon Jovi 2.9 Puddle Of Mudd 2.8 O Brother OST 2.8 Now That's Music 9 2.8 Sheryl Crow 2.7 Nickelback 2.7 Elton John 2.6 Top 15 72.4 All Others 457.8 Total 530.2 50 Cent 9
Slide 10: Revenue Source by Location - 2003
Revenue Source by Location - 2003 North America Europe Asia ANZ/Africa Latin America 1965.8 2223.7 540.4 133.7 77.5
Slide 11: United States
United States #1 music market, with 37% of global sales in 2003 Retail music market value of $11.8 billion Domestic repertoire 93% Industry performance by retail value: (Local currency) 2001 -2.2% 2002 -8.2% 2003 -6.0% Universal Music 2003 sales: e1,737m Universal Music 2003 market share: #1 with 28
Slide 12: JumpStart - US price cutting initiative
JumpStart - - US price cutting initiative Reduced MSRP * equivalent from $18.98 to $12.98 in the US (similar reduction in Canada) in October 2003. Wholesale prices cut to $9.09 and $10.10. "Co-op" advertising eliminated - replaced with direct to consumer advertising. Reaction from retailers largely
Slide 13: Japan
Japan #2 music market, with 15% of global sales in 2003 Retail music market value of JPY 569 billion Domestic repertoire 72% Industry performance by retail value: (Local currency) 2001 -0.5% 2002 -9.3% 2003 -9.2% Universal Music 2003 sales: e424m Universal Music 2003 market share: #2 with 12.9% (11.
Slide 14: United Kingdom
United Kingdom #3 music market, with 10% of global sales in 2003 Retail music market value of GBP 2 billion Domestic repertoire 49% Industry performance by retail value: (Local currency) 2001 +7.4% 2002 -2.2% 2003 +0.1% Universal Music 2003 sales: e629m includes e110m for Britannia Music Club Univer
Slide 15: France
France #4 music market, with 7% of global sales in 2003 Retail music market value of e 1.9 billion Domestic repertoire 60% Industry performance by retail value: (Local currency) 2001 +13.5% 2002 +4.1% 2003 -14.4% Universal Music 2003 sales: e547m includes e102m for DIAL music club Universal Music 20
Slide 16: Germany
Germany #5 music market, with 6% of global sales in 2003 Retail music market value of e 1.8 billion Domestic repertoire 45% Industry performance by retail value: (Local currency) 2001 -8.4% 2002 -7.5% 2003 -19.0% Universal Music 2003 sales: e323m Universal Music 2003 market share: #1 with 24.3% (25.
Slide 17: Other Music Markets
Other Music Markets ITALY #1 market share 28.1% AUSTRALIA #1 market share 20.1% SPAIN #2 market share 16.9% NETHERLANDS #1 market share 20.3% Zucchero Rosana Powderfinger Marco Borsato
Slide 18: Other Music Markets
Other Music Markets BRAZIL #1 market share 18.9% SWEDEN #1 market share 24.7% HONG KONG #1 market share 28.8% SOUTH AFRICA #1 market share 19.9% Deborah The Cardigans Jackie Cheung Sandy and Junior
Slide 19: Piracy & File Sharing
Piracy & File Sharing Piracy and illegal file sharing are costing the music industry billions in lost revenue. Enforcement activities are having an impact. Legitimate alternatives are gaining traction. Download services Subscription services
Slide 20: Piracy & File Sharing
Piracy & File Sharing RIAA has filed 1,977 lawsuits since 9/03. Last month's round of lawsuits specifically targeted some users on university networks. IFPI recently followed up with 247 lawsuits in Denmark, Italy, Germany and Canada. U.S. Department of Justice created an Intellectual Property Task
Slide 21: ABC News Clip
ABC News Clip -~ ™_ ho VIVENDI UNIVERSAE UNIVERSAL MUSIC GROUP
Slide 22: Piracy & File Sharing
Piracy & File Sharing FBI and RIAA unveiled a voluntary, government-sanctioned anti- piracy seal and warning that can be included on various types of copyrighted music. U.S. - China Joint Commission on Commerce and Trade announced several important, new initiatives that the Government of China will
Slide 23: Puretracks Commercial
Puretracks Commercial -~ ™_ ho VIVENDI UNIVERSAE UNIVERSAL MUSIC GROUP
Slide 24: Piracy & File Sharing: P2P Results in NA
Piracy & File Sharing: P2P Results in NA In the US, where we have rolled out numerous legitimate alternatives and aggressively pursued litigation, it appears that our efforts are impacting the P2P networks. Note: FastTrack includes Kazaa, Grokster, Morpheus and other P2P apps. Gnutella includes Lime
Slide 25: Piracy & File Sharing: P2P Results outside NA
Piracy & File Sharing: P2P Results outside NA P2P usage has been growing dramatically outside of the US, where operation Hubcap is just starting to roll out and where significant numbers of legitimate services are not expected to launch until summer 2004. Much of the overall growth in P2P has been o
Slide 26: Online Music: Overview
Online Music: Overview Apple is leader in downloads, followed by Napster, Musicmatch, Rhapsody and Wal-Mart Downloads: New entrants in '04 should include Sony, Microsoft, MTV, Virgin and possibly Yahoo. Subscription Services: Quietly growing 8-10% per month with over 700k total paid subscribers. The
Slide 27: Global legitimate music download forecast
Global legitimate music download forecast 2002 2003 2004 2005 2006 2007 Optimistic 0.04 0.32 1.52 3.12 5.67 9.68 Most Likely 0.04 0.21 0.71 1.8 3.34 5.89 Pessimistic 0.04 0.08 0.39 0.71 1.46 2.12 Source: RHK Inc. US$ Billions
Slide 28: Mobile Music: Overview
Mobile Music: Overview Analysts estimate the mobile content market at e5 billion, of which e3.5 billion would be the market for ringtones (>10% of the global music market) Only 60% of handsets are ringtone enabled. Market will double in the next 3 years due to: explosion of compliant handsets ease o
Slide 29: Mobile Music: Overview cont.
Mobile Music: Overview cont. UMG has a division, Universal Mobile, dedicated to producing, adapting, creating, delivering and animating content for mobile use Universal Mobile in its first full year of operation had sales of e30 million and EBITDA of e5 million With a staff of 70, Universal Mobile o
Slide 30: Global Music Publishing Market
Global Music Publishing Market 2001 2002 2003E 2004E 2005E 2006E 2007E 2008E 2009E 2010E 3530 3565 3661 3827 3979 4197 4374 4608 4818 5014 Source: Enders Analysis Ltd. $,millions
Slide 31: Universal Music Publishing Group
Universal Music Publishing Group Prince U2 Paul Simon Shania Twain Bon Jovi Ja Rule Mary J. Blige Gloria Estefan Anastacia 3 Doors Down The Corrs Chemical Brothers Blink-182 DMX Diana Krall Ice Cube The Darkness No Doubt Godsmack G-Unit Fuel Westlife Eve Musiq Everclear Andre Rieu The Beastie Boys F
Slide 32: Universal Music Publishing Group
Universal Music Publishing Group 1950's and earlier 1960's 1970's 1980's 1990's Current Old Man River Can't Help Lovin That Man Smoke Gets In Your Eyes Loverman The Way You Look Tonight Boogie Woogie Bugle Boy Tain't Nobody's Business If I Do Pick Yourself Up I'll Never Smile Again (I Love You) For
Slide 33: Universal Music Publishing Group
Universal Music Publishing Group Actual Constant Rate Actual 2002 2003 2003 Revenues 412.0 412.0 370.2 Net Publishers Share 170.7 171.1 153.0 EBITDA 125.7 119.0 105.9 Mechanicals Performance Synchronization Print & Other 0.576 0.277 0.117 0.03 e,million
Slide 34: The Power of Publishing
The Power of Publishing Average Total I Will Survive 1,323 7,937 Born to be Wild 1,178 7,069 Who Wants to be a Millionaire 999 5,995 American Pie 913 5,478 Your Song 844 5,063 My Heart Will Go On 794 4,765 Livin' la vida Loca 679 4,073 Strangers in the Night 674 4,046 Barbie Girl 602 3,609 Beautiful
Slide 35: GAP and Diet Pepsi Ads
GAP and Diet Pepsi Ads UNIVERSAE = UNIVERSAL MUSIC GROUP 36
Slide 36: Financials
Financials -_~ - UNIVERSAE ™_ UNIVERSAL MUSIC GROUP 36
Slide 37: Revenue Analysis
Revenue Analysis Actual Constant Rate % Actual 2002 2003 Change 2003 North America 2,821 2,383 -15% 2,013 Europe 2,588 2,287 -12% 2,212 Asia 588 606 +3% 540 ANZA 139 127 -9% 131 Latin America 140 101 -28% 78 6,276 5,504 -12% 4,974 e,million
Slide 38: Revenue Change
Revenue Change 2000 2001 2002 2003
Slide 39: Revenue Sources 2003
Revenue Sources 2003 Product Sales Publishing License & Other 4146 370 462 New Releases Catalog Classical TV & Special Distribution Singles DVD & Video 1545.1 690.2 225.2 532.3 660.2 160.7 314.3
Slide 40: UMG Financial Summary
UMG Financial Summary Actual Constant Rate % Actual 2002 2003 Change 2003 Revenue 6,276 5,504 -12% 4,974 EBITDA 960 454 -53% 438 Operating Income 556 14 -98% 70 e,million
Slide 41: UMG Profit & Loss
UMG Profit & Loss Actual Constant Rate Actual 2002 2003 2003 Revenue 6,276 5,504 4,974 Royalties, Copyright & Other Content 2,226 2,137 1,922 Manufacturing & Distribution 809 731 668 Gross Margin 3,240 2,636 2,384 Marketing & Selling 1,542 1,292 1,166 General & Administrative 738 890 780 EBITDA 960
Slide 42: UMG Cash Flow
UMG Cash Flow Actual Actual 2002 2003 EBITDA 960 438 Artist Advances & Recording Costs (898) (690) Recoupment & Other 833 718 Content Investments (51) (17) Net Content Investments (116) 11 Working Capital & Other (239) 97 Capital Expenditure (82) (45) Restructuring - (38) Cash Flow from Operations 5
Slide 43: Costs & Expenses 2003
Costs & Expenses 2003 Manufacturing, Sales & Distribution Royalties & Copyright Advances & Recording Costs Marketing Costs Overhead, General & Administration
Slide 44: Cost Saving Initiatives
Cost Saving Initiatives Restructuring Initiatives Review resource allocation in key cost areas of all countries and businesses to align the cost base with market declines Actions Overhead savings ; about 1,500 headcount reduction in the past two years A&R investment reduced in unattractive risk/rewa
Slide 45: Cost Savings Expected in 2004
Cost Savings Expected in 2004 A&R Costs 40 Marketing 90 Overhead 130 Savings 260 Less Additional Marketing (35) 225 Restructuring costs were e80m in 2003 and are expected to be about e70m in 2004 e,million
Slide 46: Projections
Projections Worldwide revenue is projected to decline slightly at constant currency along with the industry. EBITDA and Operating Income: expected to grow Cash flow from operations: below 2003 level, largely the consequence of the restructuring charges impacting cash flow in 2004.
Slide 47: Summary
Summary -_~ - UNIVERSAE ™_ UNIVERSAL MUSIC GROUP 47
Slide 48: Forecast Industry Growth
Forecast Industry Growth 2000 2001 2002 2003 2004 2005 2006 2007 Understanding & Solutions Forecast
Slide 49: Recent Developments in the US Music Market
Recent Developments in the US Music Market 'JAN 01 'APR 01 'JUL 01 'OCT 01 'JAN 02 'APR 02 'JUL 02 'OCT 02 'JAN 03 'APR 03 'JUL 03 'OCT 03 'JAN 04 'APR 04 0.028 0.005 -0.067 -0.054 -0.058 -0.021 0.01 0.055 -0.039 -0.068 -0.061 -0.043 -0.065 -0.109 -0.066 -0.132 -0.092 -0.121 -0.119 -0.129 -0.121 -0.
Slide 50: Upcoming Release Schedule 2004
Upcoming Release Schedule 2004 Key Release Sales of last album Eminem 17 million U2 10 million Shania Twain 10 million 50 Cent 9 million Nelly 9 million Elton John 4 million D12 3 million Mariah Carey 3 million Toby Keith 3 million Andrea Bocelli 3 million
Slide 51: End of Presentation
End of Presentation -~ - UNIVERSAE -_ UNIVERSAL MUSIC GROUP 51
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