Vivendi chief waxes optimistic on digital music

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When it comes to digital music revenue, Vivendi Chief Executive Jean-Bernard Levy sees music industry wallets as half full.

Levy told the Financial Times this week that his company expected strong growth from its Universal Music Group, saying that it was ‘extremely active in developing new business models, new sources of revenues. We are working with all the big names in the field of Internet, in the field of telecom equipment companies, big media companies, and this is a big opportunity.’

Levy, as the Coolfer blog noted, has long been an optimist. But perhaps with good reason — Universal Music Group, the largest of the four major labels, reported a 29.1% increase in digital revenue in the first half of 2008, at constant currency. Digital sales accounted for 21% of the company’s recorded-music total.

Way back at the turn of the century, Universal formed its ELabs division to handle ‘electronic commerce initiatives, Internet exploitation and new technology business opportunities worldwide.’ It was one of the first labels to partner with YouTube and allow the site to stream music videos by Universal artists — a group that includes heavyweights like this week’s chart-topping rockers Metallica and high-selling rapper Lil Wayne.

Last year the company became the second major label, after fourth-place EMI, to sell MP3 tracks on Amazon.com, which lack the copyright protection software of most iTunes songs. And this month, Universal President Zach Horowitz credited video games like Guitar Hero with boosting sales of old releases like Weezer’s ‘My Name is Jonas,’ according to gaming publications and blogs.

But the company has also been protective of its content, sometimes going to more extreme measures than other labels. The company threatened to sue YouTube in 2006 and did sue MySpace, before settling and agreeing to let its content appear on the soon-to-be-launched MySpace Music. More recently, it asked one woman to remove a clip she had posted on YouTube of her toddler dancing to a Prince song. The woman later sued (and The Times’ tech blog has more).

And Universal’s power in the digital field may come not only from its innovation and adaptation but also from its position as the 800-pound gorilla of the labels. It has the greatest share of the recorded-music market and also, since its purchase of a division from Bertelsmann two years ago, of music publishing.

‘As the largest record company, certainly they’re a desired partner for any digital distribution company,’ said Gartner analyst Michael McGuire. ‘They’ve defended their turf and moved into the digital area, but I don’t think they’re more or less innovative than the others.’

-- Swati Pandey