updated 03:45 pm EDT, Wed September 17, 2008
Universal Music Profit
Universal Music may have finally reached the point at which purely digital music has become profitable, Vivendi Universal chief Jean Bernard LÚvy has told the Financial Times. Despite most major labels having seen rapid declines in CD sales that have yet to be compensated by online purchases, Universal now has a "surprise" for investors of a five percent boost in its first-half 2008 revenue to $3.1 billion where it would previously have posted a loss. The change is a sign that the company is nearing the point at which CDs can hurt its bottom line, according to LÚvy.
"There is a strong likelihood that we are getting close to the lowest part of the cycle," he says. ""I really believe we are at the turning point for the music industry and I didn't say that two years ago."
The executive explains that some of the optimism comes from the company finding more viable alternatives to generate revenue from music, which has included its efforts in starting up Nokia's Comes With Music service that ties a year of unlimited music downloads to a higher phone price. He also points to accelerated growth from planned or potential initiatives such as MySpace Music as well as "possible future deals" with Apple, although he doesn't add detail to the remark.
Whether any other steps have helped the company's bottom line performance is unknown. The company offers unprotected music at stores such as Amazon MP3 but has been resistant to doing so at iTunes and elsehwere.
Universal's revelation also comes as direct-download music is becoming the dominant form of purchasing in some countries. In the US, iTunes is the largest individual music retailer ahead of very large CD-oriented stores from Wal-Mart and Best Buy while also playing a significant role in other areas.