The Turnaround of Vivendi Universal

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Case Details:

Case Code : BSTR199
Case Length : 15 Pages
Pages Period : 1998-2005
Organization : Vivendi Universal
Pub Date : 2006
Teaching Note :Not Available
Countries : France
Industry : Media and Telecommunications

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The New Vivendi Universal

In 2003, the music industry itself was in a declining phase as result of piracy and counterfeiting. This had an impact on VU too as UMG's sales declined in the year 2003. To cope with the situation, UMG slashed the prices of its CDs in the US by upto 30% in October 2003. This move was intended to lure back consumers.

According to Jim Urie, president of Universal Music and Video Distribution, "The music industry has really been under siege....The illegal file-sharing and peer-to-peer sites have really eaten into the music business in the last few years." He also said, "We feel like we've got to make this change to make music a better value for the consumer." Also in October 2003, UMG entered into an agreement with eBay, an Internet-based retailer to sell UMG's latest releases online. Through this agreement UMG gained access to the 75 million registered users of eBay, to whom it could promote its products. The company also initiated various online promotions and cross-marketing activities like offering a chance to win backstage passes, tickets to live concerts, etc., to improve music sales...

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On the Right Track?

In November 2005, VU published its financial data pertaining to the first nine months of 2005. The company's revenues amounted to € 14 billion. The revenues of UMG stood at € 3.211 billion while those of VUG's were at €396 million, CPG at € 2.56 billion, SFR (mobile operations) at €6.47 billion and Maroc Telecom at € 565 million.

As of 2005, SFR was the second-largest mobile and fixed telecom operator in France. SFR was also the first mobile operator in France to introduce 3G technology. The telecom business was extremely important to VU because it was the cash flows generated from SFR that helped VU sustain itself through the period when it was struggling to survive. Maroc Telecom's revenues for the first nine months in 2005 increased by 17% when compared to revenues earned for the same period in the previous year. While UMG continued to be a market leader despite the decline in the music industry, the loss-making VUG too made a surprise turnaround in 2005. By the end of 2005, VUG became one of the leading companies in the console, PC, handheld and online games market...


Exhibit I: Revenues from Various Business Segments
Exhibit II: Financial Net Debt
Exhibit III: Consolidated Financial Data
Exhibit IV: Revenues from various Business Segments
Exhibit V: Cash Flow from Operations of various Business Segments

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