Universal Music Group N.v. · EURONEXT:UMG
Universal Music — Investor Day (November 2006)
40 slides from Universal Music's investor day presentation, Nov 30, 2006
Slide 1: Universal Music Group Investor Meeting
Universal Music Group Investor Meeting 30th November 2006 Important Notice: Investors are strongly urged to read the legal disclaimer at the end of the presentation.
Slide 2: UMG Global Market Share
Universal Music Group UMG Global Market Share 30% 25.3% 25.5% 25.6% 25% 22.9% 23.5% 23.4% 21.7% 20% 15% 10% 5% 0% 1999 2000 2001 2002 2003 2004 2005 Source: IFPI 1999-2004, Informa Telecoms & Media 2005, Physical sales only 2
Slide 3: United States
United States • # 1 music market, with 34% of global sales in 2005 – Trade music market value of $7,012 million – Domestic repertoire 93% of total market • Digital sales $636 million, 56% of the global digital market • Industry Performance by trade value: Local Currency 2005 -2.8% 2004 +4.7% • Unive
Slide 4: United States: Album Unit Market Share
United States Nielsen SoundScan YTD U.S. Total Album Unit Market Share 35% 31.4% 31.7% 30% 26.9% 27.2% 25% 20% 18.5% 17.3% 15% 10.1% 10.5% 10% 5% 0% 2006 2005 Source: Nielsen SoundScan YTD w.e. 19th November 2006 4
Slide 5: United States
United States UMG leads the U.S. market in every meaningful category. Overall Albums (31.4%) Digital Track Sales (32.7%) Catalog (27.1%) ¾ Catalog sales have remained constant 2004-2006 at 48.7m units #1 Albums from UMG Artists ¾ 2006: 20 of first 46 weeks ¾ 2005: 26 of 52 weeks Source: Niel
Slide 6: UMG U.S. Selected Genre Market Share
UMG U.S. Selected Genre Market Share Country 30.3% Rock 31.4% Jazz 35.1% Classical 37.9% R&B 38.6% Rap 41.7% Latin 50.6% 0.0% 20.0% 40.0% 60.0% Source: Nielsen SoundScan YTD w.e. 19th November 2006 6
Slide 7: United Kingdom
United Kingdom • # 3 music market, with 10% of global sales in 2005 – Trade music market value of $2,162 million – Domestic repertoire 50% of total market • Digital sales $69 million, 6% of the global digital market • Industry Performance by trade value: Local Currency 2005 -2.9% 2004 -0.4% • Univer
Slide 8: United Kingdom: Album Market Share
United Kingdom Official U.K. Chart Company Total U.K. Album Market Share 30% 27.1% 25.0% 25% 20.1% 20.5% 20% 18.1% 18.8% 15% 12.8% 11.7% 10% 5% 0% 2006 2005 Source: The Official UK Chart Company October YTD 8
Slide 9: United Kingdom
United Kingdom Source: The Official UK Chart Company Week of September 9th, 2006 9
Slide 10: Japan
Japan • # 2 music market, with 18% of global sales in 2005 – Trade music market value of $3,718 million – Domestic repertoire 74% of total market • Digital sales $278 million, 24% of the global digital market • Industry Performance by trade value: Local Currency 2005 +0.6% 2004 +1.5% • Universal Mus
Slide 11: Germany
Germany • # 4 music market, with 7% of global sales in 2005 – Trade music market value of $1,458 million – Domestic repertoire 46% of total market • Digital sales $39 million, 3% of the global digital market • Industry Performance by trade value: Local Currency 2005 +0.4% 2004 -3.3% • Universal Musi
Slide 12: France
France • # 5 music market, with 6% of global sales in 2005 – Trade music market value of $1,248 million – Domestic repertoire 61% of total market • Digital sales $28 million, 2% of the global digital market • Industry Performance by trade value: Local Currency 2005 -1.7% 2004 -13.6% • Universal Musi
Slide 13: Market Update
Market Update IFPI 1st Half Music Market Highlights • Total market declines 4% to $8.4 billion (trade) with physical sales down 10%. • Digital sales grew to $945 million, up 106% versus last year • Digital sales generate 11% of total recorded music market up from 5.5% last year* • Market growth in J
Slide 14: Digital Outlook
INTERSCOPE recordings 3 ISLAND motown (— Digital Outlook
Slide 15: UMG Global Digital Revenue
UMG Global Digital Revenue € Millions 250 200 150 100 50 0 1st Half '04 2nd Half '04 1st Half '05 2nd Half '05 1st Half '06 Recorded Music Music Publishing 15
Slide 16: UMG Global Digital Revenue by Territory
UMG Global Digital Revenue Digital Revenue by Territory Growth by Territory 1st Half 2006 1H 2006 vs. 1H 2005 13% U.S + 128% 4% Other Japan + 138% Germany U.K. + 65% 6% France France + 75% 7% U.K. U.S. Germany + 55% Japan 62% Other + 179% 8% Total UMG + 120% Digital sales from recorded music only 16
Slide 17: #1 in the Largest Market
#1 in the Largest Market U.S. Digital Tracks Market Share 35% 32.7% 30% 25.6% 25% 20.0% 20% 15% 10% 8.0% 5% 0% Source: Nielsen SoundScan YTD w.e. 19th November 2006 17
Slide 18: Recorded Music Revenue: Online vs. Mobile
UMG Global Digital Revenue Recorded Music Revenue - Online vs. Mobile 250 200 Euros (millions) 147% Mobile 150 Growth Online 100 102% 50 Growth - U.S. 1H 2005 1H 2006 • Total Growth 1H 2005 vs. 1H 2006 – 120% • In 1H 2006, Mobile was 45% of total global digital revenue Digital sales from recorded mu
Slide 19: Digital Strategy
Digital Strategy UMG seeks to market its content wherever there is an audience and through all distribution platforms (mobile, online, TV, etc.). Music remains the most popular digital content Competition among distributors increases value of content New distribution channels create revenue st
Slide 20: Leadership in Digital Music
Leadership in Digital Music UMG remains the leader in digital music, both in terms of revenue and in development of new business models. € Millions Global Digital Revenue 350 12 months ending 3/31/06 300 250 200 150 100 50 0 Source: Company financials 20
Slide 21: The Transition to Digital
The Transition to Digital The CD is in a state of decline. UMG will increase revenue through a growing array of new digital business models and products. Existing digital business models and products ¾ A la carte PC-based audio and video downloads ¾ Mastertones and other mobile personalization pro
Slide 22: Product Snapshot: US Mastertones
Product Snapshot: US Mastertones UMG’s US Mastertone sales have exploded as the US has become the #1 Mastertone market UMG sold over 44m Mastertones in 1H ’06 UMG Mastertone Unit Sales - North America (millions) 50.0 40.0 30.0 20.0 151% Growth 10.0 0.0 1H 2005 1H 2006 22
Slide 23: Product Snapshot: Mobile OTA downloads
Product Snapshot: Mobile OTA downloads Q2 ’06 OTA download revenue grew 17% from prior quarter OTA downloads represented 9% of total UMG global downloads in July, ’06 OTA downloads have exceeded expectations in several markets Strong growth in UK and Italy from carrier “3” KDDI has driven
Slide 24: Product Snapshot: Int'l Online downloads
Product Snapshot: Int’l Online downloads Although iTunes is the dominant player overall, the international market is more fragmented than the US After a slower start, UMG’s international online download revenue grew at a faster rate than the US in 1H ‘06 Ex-US Online Download Revenue (Euros in m
Slide 25: Product Snapshot: Digital Video Content
Product Snapshot: Digital Video Content Music videos: traditionally “promotional” Annual cost to UMG of tens of millions of dollars UMG has led the industry in monetizing our video assets Within 3 years, music videos will evolve from a marketing cost to net source of revenue This represent
Slide 26: Emerging Markets
Emerging Markets UMG has adapted its strategy in less developed markets based on prevailing local conditions. In markets with minimal existing sales, digital and mobile business models can emerge rapidly (e.g., India, China, Africa, Eastern Europe) Markets lost to piracy can become commercially
Slide 27: Publishing
(— Publishing Ne
Slide 28: Revenue Drivers
Revenue Drivers Music Publishing is forecasted to grow at an average rate of ~4.5% through 2013, driven by: • Digital, Performance, Synchronization •Improvements in Collection Accuracy US$ 6000 and Efficiency Millions 5500 5000 4500 4000 3500 3000 2500 2002 2003 2004 2005 2006E 2007E 2008E 2009E 201
Slide 29: Universal Music Publishing Group
Universal Music Publishing Group U2 Gloria Estefan Anastacia Paul Simon Prince 3 Doors Down Diana Krall The Corrs ABBA Bon Jovi Andre Rieu Chemical Brothers 50 Cent Avril Lavigne Mary J. Blige Franz Ferdinand Heart George Thorogood Leonard Bernstein Elton John Bernie Taupin Henry Mancini The Killers
Slide 30: BMG Music Publishing
BMG Music Publishing Coldplay R Kelly Famous Music Robbie Williams Joss Stone Alanis Morissette Keane Linkin Park Linda Perry Shania Twain Mutt Lange Bee Gees Britney Spears Juan Gabriel Pete Townshend Maroon 5 The Cure Elvis Costello Backstreet Boys Massive Attack Rammstein Paul Weller Powderfinger
Slide 31: Acquisition of BMG Music Publishing
Acquisition of BMG Music Publishing • Consideration: €1,630 million in Enterprise value • Why Music Publishing? – Attractive low risk, high margin business – Stable, low-volatility, annuity-like cash flows – Highly scaleable business – Uniquely positioned to benefit from explosion in new media – Low
Slide 32: Acquisition of BMG Music Publishing
Acquisition of BMG Music Publishing • Why BMG Music Publishing? – Unique and diverse catalog with over 1m copyrights – Attractive Production Music Library business – Classical and Christian genre position – Complementary to UMG Music Publishing – Synergies enhance value creation 32
Slide 33: Acquisition of BMG Music Publishing: A Unique Opportunity
Acquisition of BMG Music Publishing A Unique Opportunity…. BMG Music Publishing strengthens UMG’s collection of music assets and enables UMG to derive a larger share of its revenue from music publishing’s stable and diverse revenue streams. UMG Today UMG + BMG MP Publishing BMG MP Publishing 8% 14%
Slide 34: Financials
la Financials Ne
Slide 35: Operating Results
Operating Results Millions of Euros 2005 2004PF % Change at Constant Currency Revenues North America 2,091 2,006 4.5% Europe 1,821 1,833 -0.6% Asia 425 455 -5.0% Rest of the World 207 191 1.9% 4,544 4,485 1.4% Publishing 392 372 5.8% Elimination (43) (38) -14.7% Total UMG 4,893 4,819 1.6% EBITDA 760
Slide 36: Operating Results
Operating Results On a comparable basis In million Euros Revenues +2.7% 9 months ended 9.30.06 3,298 3,211 • Sales are up 2.7% (up 1.4% in constant currency) – Digital sales were €348m, 10.5% of total revenues, 9 months 9 months with strong growth in all markets and sectors 2005 2006 – Higher licens
Slide 37: Operating Results: Top Selling Artists
Operating Results Top Selling Artists 9 months Million 9 months Million 2005 Units 2006 Units 50 Cent 7.3 Andrea Bocelli 3.0 Mariah Carey 5.6 The Pussycat Dolls 2.5 Black Eyed Peas 4.2 Rihanna 2.5 Gwen Stefani 3.5 Nelly Furtado 2.2 The Game 3.2 Jack Johnson 2.1 and Friends Top 15 Artists 44.7 Top 15
Slide 38: Operating Results: Revenue Mix
Operating Results Revenue 9 months ended 9.30.06 Other Digital 3% 11% Publishing 8% Product Sales License 3% Singles Video 2% 8% Product Sales 75% Catalog 29% New Releases 61% 38
Slide 39: Universal Music Group Investor Meeting
Universal Music Group Investor Meeting 30th November 2006 Important Notice: Investors are strongly urged to read the legal disclaimer at the end of the presentation.
Slide 40: Important Disclaimer
Important Disclaimer This presentation contains forward-looking statements with respect to the financial condition, results of operations, business, strategy and plans of Vivendi. Although Vivendi believes that such forward- looking statements are based on reasonable assumptions, such statements are