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Vivendi — Vivendi Universal — Investor Presentation (October 2005)
51 slides from Vivendi's investor presentation, Oct 7, 2005
Slide 1: Universal Music Group Investor Presentation, October 2005, London
Important Notice: Investors are strongly urged to read the legal disclaimer at the end of this presentation Universal Music Group Investor Presentation October, 2005 London
Slide 2: Universal Music Group Management Presenters
Doug Morris - Chairman & CEO and Member of Vivendi Universal Management Board Zach Horowitz - President & COO Lucian Grainge - Chairman & CEO, UMGI Nick Henny - Vice Chairman & CFO
Slide 3: Overview
Overview
Slide 4: Universal Music Group Operating Results 1st Half 2005
Universal Music Group Operating Results 1st Half 2005 Comparable basis illustrates the effect of the divestiture of UMG's Music Clubs in the U.K. and France as if they occurred as of January 1st, 2004.
Slide 5: Universal Music Group 2004 Global Market Shares
Universal Music Group 2004 Global Market Shares Source: IFPI
Slide 6: UMG Global Market Share
Universal Music Group 1999 2000 2001 2002 2003 2004 UMG 0.217 0.229 0.235 0.253 0.234 0.255 UMG Global Market Share Source: IFPI
Slide 7: US and UK Total Album Market Share 1st Half 2005
U.S. Nielsen SoundScan Total Album Market Share 1st Half 2005 U.K. Official U.K. Chart Company Total Album Market Share 1st Half 2005 Universal Music Group Source: Nielsen SoundScan period ending 7.3.05 Source: The Official U.K. Chart Company
Slide 8: US Current Album Market Share and Best Sellers 1st Half 2005
U.S. Nielsen SoundScan Current Album Market Share 1st Half 2005 Nielsen SoundScan Best Sellers 1st Half 2005 Universal Music Group Source: Nielsen SoundScan period ending 7.3.05 Units Millions 50 Cent 4.0 Mariah Carey 2.3 The Game 2.1 Green Day 1.9 Kelly Clarkson 1.6 Gwen Stefani 1.5 Coldplay 1.4 Th
Slide 9: Universal Music Group Billboard Rankings
Universal Music Group Source: Billboard
Slide 10: Universal Music Group Artist Roster
3 Doors Down 50 Cent Akon Alien Ant Farm All American Rejects India Arie Ashanti Audioslave Erykah Badu Lloyd Banks Beck Daniel Bedingfield Bee Gees Black Eyed Peas Mary J. Blige Blink 182 Bloodhound Gang Andrea Bocelli Bon Jovi Calogero CamRon Mariah Carey Vanessa Carlton Sheryl Crow Jamie Cullum D
Slide 11: Recorded Music
Recorded Music
Slide 12: United States Market
United States #1 music market, with 36% of global sales in 2004 Retail music market value of $12.2 billion Domestic repertoire 93% Industry performance by retail value: (Local currency) 2002 -8.2% 2003 -6.0% 2004 +2.6% 2005 (1st Half UMG est.) -5.3% Universal Music 2004 sales: €1,837m Universal Musi
Slide 13: United Kingdom Market Share 2004
United Kingdom Market Share 2004 Source: IFPI, UMG #3 music market, with 10% of global sales in 2004 Retail music market value of $3.5 billion Domestic repertoire 51% Industry performance by retail value: (Local currency) 2002 -2.2% 2003 +0.1% 2004 -1.6% 2005 (1st Half UMG est.) -4.0% Universal Musi
Slide 14: UK Signed Acts Broken In Last Years
United Kingdom UK Signed Acts Broken In Last 3 Years Units Millions For the period ended December 31, 2004
Slide 15: France Market Share 2004
France Market Share 2004 Source: IFPI, UMG #5 music market, with 6% of global sales in 2004 Retail music market value of $2.0 billion Domestic repertoire 63% Industry performance by retail value: (Local currency) 2002 +4.1% 2003 -14.4% 2004 -14.8% 2005 (1st Half UMG est.) -2.7% Universal Music 2004
Slide 16: Japan Market Share 2004
Japan Market Share 2004 Source: IFPI, UMG #2 music market, with 15% of global sales in 2004 Retail music market value of $5.2 billion Domestic repertoire 72% Industry performance by retail value: (Local currency) 2002 -9.3% 2003 -9.2% 2004 -1.8% 2005 (1st Half UMG est.) -9.2% Universal Music 2004 sa
Slide 17: Germany Market Share 2004
Germany Market Share 2004 Source: IFPI, UMG #4 music market, with 6% of global sales in 2004 Retail music market value of $2.1 billion Domestic repertoire 49% Industry performance by retail value: (Local currency) 2002 -7.9% 2003 -17.9% 2004 -4.2% 2005 (1st Half UMG est.) -5.8% Universal Music 2004
Slide 18: Music Publishing
Music Publishing
Slide 19: Universal Music Publishing Group 2004 Global Market Shares
Universal Music Publishing Group 2004 Global Market Shares Source: UMPG estimates using Music & Copyright Data All Indies
Slide 20: Universal Music Publishing Group Writers and Songs
Universal Music Publishing Group U2 Gloria Estefan Anastacia Paul Simon Prince 3 Doors Down Shania Twain Diana Krall The Corrs Bon Jovi Andre Rieu Chemical Brothers 50 Cent Avril Lavigne Blink-182 Mary J. Blige No Doubt Franz Ferdinand Leonard Bernstein Elton John Bernie Taupin Henry Mancini The Kil
Slide 21: Universal Music Publishing Group Multiple Revenue Streams
Universal Music Publishing Group Mechanical Performance Synchronization Other 204.9 114.8 39.1 12.6 CD / Cassette Sales Digital downloads Video Karaoke Ring Tones Mastertones TV, Radio, Cable Broadcasts Live Performances Film Performances Theatrical Performances Ring Tones Music in nightclubs, bars,
Slide 22: Diverse Exploitation Potential
Diverse Exploitation Potential Source: UMPG Ringtones UMPG's 50 Cent named "Ringtone Artist of the Year" ITD Ringtone collections >$1m Synchronization Starring in a feature film "Get Rich or Die Tryin'". Ten (10) songs being utilized in the film. Reebok commercial Various other songs licensed for fi
Slide 23: Universal Music Publishing Group Operating Results
Universal Music Publishing Group Operating Results
Slide 24: Revenue Drivers
Revenue Drivers Music Publishing is forecasted to grow at an average rate of ~4.6% through 2010, driven by: Digital Performance Synchronization Source: Enders Analysis (04-04), adjusted for UMG estimated actual revenue for CY2004 2000 2001 2002 2003 2004 2005E 2006E 2007E 2008E 2009E 2010E 3629 3530
Slide 25: New Business Opportunities
New Business Opportunities
Slide 26: Existing Digital Initiatives
Digital Downloads Mobile Subscriptions Existing Digital Initiatives Revenue from these businesses grew from essentially nothing in the first half of 2003 to over €100 million for the first half of 2005
Slide 27: Existing Digital Initiatives: Downloads
Top 10 US Digital Tracks - week ending 9/04/05 DOWNLOADS US Digital Market share is 36.1% YTD. Existing Digital Initiatives Source: Nielsen SoundScan
Slide 28: Existing Digital Initiatives: Mobile
MOBILE Top 10 US Mastertones - week ending 9/11/05* : UMG has sold over 25 million Mastertones in the US YTD Earned over €27 million from mobile products outside of the US in first half of 2005 * Source: Infospace Existing Digital Initiatives
Slide 29: Existing Digital Initiatives: Subscription Services
SUBSCRIPTION SERVICES UMG revenue from subscriptions has grown at an 8% average monthly growth rate the past 12 months. Existing Digital Initiatives Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 882 911 948 1024 1124 1211 1261 1369 1395 1478 1490 1535 Paid US Subscribers Source: UMG
Slide 30: Digital Model
Digital Model Revenue Manufacturing Distribution Royalties A&R Expenses Gross Margin Marketing Other Selling Expenses Overhead, G&A & Other EBITDA Amortization Depreciation Other Earnings From Operations Physical Costs avoided manufacturing and inventory costs physical distribution and returns handl
Slide 31: New Revenue Opportunities
Existing digital businesses will be the engine of growth for the next several years New opportunities will emerge to monetize our assets and create new revenue streams A transformation is underway from a "record company" to a "music entertainment company" New Revenue Opportunities
Slide 32: Legitimizing Peer-to-Peer
Increasing pressure and generating revenue from legitimate usage of P2P Legitimizing Peer-to-Peer Key legal victories recently in the US, Australia, and Taiwan Technical countermeasures spur growth in legal alternatives Increased government support from countries around the world Convert cooperative
Slide 33: Ad-Supported Models
UMG is positioned to benefit from the shift towards more targeted and measurable media, and take a piece of the $300 billion global advertising pie Music Videos Pioneered the monetization of music videos on-line (Yahoo!, MSN, AOL, etc.) Cable and satellite VOD tests very promising Audio New models r
Slide 34: Podcasting
Podcasting An important new media distribution channel Talk / Spoken-word currently dominates podcasts No legal mechanism to access major music catalogs UMG working to establish a licensing structure for podcasting A potential competitor to broadcast radio and new revenue stream for UMG New Revenue
Slide 35: Developing New Businesses
IMF (International Music Feed) Distribution to just under 10 million homes New revenue share model for content owners amp'd Mobile Equity stake in music-focused MVNO UMG will license amp'd a broad array of content Aggressive management with strong track record (Boost Mobile) Developing New Businesse
Slide 36: Expanding Relationships with Artists
UMG is in the business of creating global stars and brands. We are now beginning to expand our relationships with our artists and share in the multiple revenue streams that accrue from their success Expanding Relationships with Artists Pussycat Dolls Recorded music, touring, cosmetics, clothing, app
Slide 37: The Transformation Is Underway
We are evolving from a "record company" to a "music entertainment company." Sources of Revenue - 2001 CD Sales Film & TV Licensing Sources of Revenue - 2006+ CD Sales Film & TV Licensing Audio Downloads Subscriptions Satellite and interactive radio Mobile Videos (VOD, downloads, broadcast) Ad-suppor
Slide 38: Vivendi Universal
VIVENDI UNIVERSAL
Slide 39: UMG Half Year Results to June 2005
VIVENDI UNIVERSAL Half Year ended June 30 Actual Actual % € Millions IFRS 2004 2005 Change 2005 Comparable Basis* Constant FX Product Sales 1,585 x License Income: 135 126 123 Digital Revenue 32 101 OF Music Publishing 176 182 77 Other 6? 73 7] Elimination (21) (25) (24) Revenue 1,976 2,159 9% 2,092
Slide 40: UMG Digital Revenue
UMG Digital Revenue Source: UMG 2H 03 1H 04 2H 04 1H 05 Music 17.6 32.2 55.4 96.9 Music Publishing 2.3 3.4 3.9 6.4 € Millions
Slide 41: UMG Digital Revenue by Type 1st Half 2005
UMG Digital Revenue Revenue by Type 1st Half 2005 Source: UMG, Digital sales from recorded music only
Slide 42: UMG Digital Revenue by Territory 1st Half 2005
UMG Digital Revenue On-Line by Territory 1st Half 2005 Mobile by Territory 1st Half 2005 Source: UMG, Digital sales from recorded music only
Slide 43: UMG Cash Flow
UMG Cash Flow Half Year ended June 30 Actual Actual 2004 2005 Comparable Basis* EBITDA 231 271 Working Capital & Other 18 (5) Capital Expenditure (14) (23) Disposal of M&D Facilities - 27 Restructuring (53) (21) Cash Flow From Operations 182 249 + Comp arable basisilustrates the effect of the divest
Slide 44: UMG Profit & Loss Account
UMG Profit & Loss Account € Millions IFRS Revenue Cost of Goods Sold Gross Margin Selling, G&A EBITDA Half Year Ended June 30 Actual Actual 2004 2005 2,066 2092 (1,092) 52.9% (1,082) 974 47.1% 1,010 (749) 36.3% (739) 225 10.9% 271 §1.7% 48.3% 35.3% 13.0% VIVENDI UNIVERSAL
Slide 45: Cost Comparison
Cost Comparison Note: 2003 US GAAP, 2004-2005 IFRS
Slide 46: Summary
Summary
Slide 47: Universal Music Group Summary
Universal Music Group Highly profitable and a significant cash generator despite difficult business environment Deep pool of management talent and the ability to attract best professionals in the industry when necessary Cost base overhauled General cost reductions Major shift to outsourcing in manuf
Slide 48: Music Market Forecast
Music Market Forecast 2004 2005E 2006E 2007E 2008E 2009E 2010E Physical 33614 33173 32510 31697 30905 29823 28779 Digital 350 875 2129 3645 5468 7519 9304 $ Millions Global Music Revenue - Retail Source: IFPI, Merrill Lynch Research
Slide 49: Upcoming Release Schedule CY 2005
Upcoming Release Schedule CY 2005 50 Cent OST Avant Bee Gees Mary J. Blige Blink 182 Sheryl Crow Jamie Cullum DMX Eminem Enrique Iglesias Diana Krall Reba McEntire Nickelback Ashlee Simpson Sugababes Texas Stevie Wonder Akon Beck Andrea Bocelli Sheryl Crow D-12 Daddy Yankee Dr Dre Eve Stacy Ferguson
Slide 50: 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 51: Important Notice: Read the Legal Disclaimer
Important Notice: Investors are strongly urged to read the legal disclaimer at the end of this presentation Universal Music Group Investor Presentation October, 2005
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