Seagram Sews Up Good Quarter

Reporting results for the last time, Seagram sees EBITDA gains across all divisions. The new Vivendi Universal entity could bring in combined revenues of some $55 billion with EBITDA of about $7 billion. Meanwhile, shareholders ponder what effects the Napster-Bertelsmann agreement will have on the company's music subscription service.

	Format for printing Reuse/Reprint
	Related Links Bertelsmann Partners With Napster Seagram Beats Street, Prepares for Convergence
	Discussion Boards Seagram Napster

By Rex Moore (TMF Orangeblood)
November 6, 2000

Seagram (NYSE: VO) announced Wednesday first-quarter operating profits of $172 million, up 138% from the year-ago period. Reporting for the final time as an independent company, the media, entertainment, and spirits giant said it earned $0.05 a share during the quarter, which tops consensus estimates by $0.03. (The results exclude a $390 million charge related to an accounting change.)

Seagram has agreed to be acquired by France-based Vivendi (NYSE: V), and the deal is expected to close before the end of the year. The new entity will be called Vivendi Universal, and will combine Seagram's music and film content with Vivendi's communication and distribution prowess. France's Canal Plus, the European leader in pay television, is also joining the fold.

In the first quarter, earnings before interest, taxes, depreciation, and amortization (EBITDA) checked in at $466 million, an increase of 32% over the first quarter in fiscal 2000. Breaking out the numbers, EBITDA was up across all divisions. The music division, which comprises the world's largest recorded music company, Universal Music Group, saw a 14% increase.

Led by such successes as The Nutty Professor II and strong home video sales of Erin Brockovich, EBITDA for the filmed entertainment division was $23 million, compared to a loss of $38 million last year. The recreation division showed a 14% increase, helped by continued growth at Universal City Hollywood. Finally, the spirits and wine division, which will soon be sold, rose 13%.

Seagram President and CEO Edgar Bronfman, Jr. expects the new Vivendi Universal company to bring in combined revenues of some $55 billion with EBITDA of about $7 billion. The company will have the ability to deliver movies, television programming, and music to millions of consumers in a wide variety of formats. One of those formats is called Vizzavi, which according to management will be "the default portal for 80 million mobile and interactive TV subscribers of Vivendis 50/50 joint venture with Vodafone (NYSE: VOD), and Canal Plus."

One of the more interesting projects shareholders can look for is a subscription-based online music and video service. Universal Music Group and Sony (NYSE: SNE) Music Entertainment have combined in this venture, and Bronfman says it should officially launch in January.

This will be the first time a major record label has distributed music in this manner, and is made even more interesting by Napster's recent agreement with Germany's Bertelsmann AG. That deal, in which the media giant and file-swapping service will partner on a royalty-based music service, was apparently controversial enough that two top execs at Bertelsmann's BMG Entertainment division quit.

Can the Universal/Sony alliance prosper, or would it better serve shareholders to fall in behind Bertelsmann and join up with Napster? The answers aren't at all clear, and the next several months should be very interesting to watch.

Feedback about News & Commentary? Please send mail to news@fool.com.