UMG Posts Nice Quarterly Gain; Broader Year Problematic

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Universal Music Group (UMG) posted a considerable earnings gain during the fourth quarter, according to figures released Monday by parent Vivendi.

But the broader year produced gaping revenue and earnings drops, suggesting a continued search for the bottom.

As the quarter wrapped, EBITDA (earnings before interest, taxes, depreciation and amortization) gained 11.9 percent to €311 million ($421.8 million) from 2008, and 18.7 percent when measured at constant currencies.  Revenues actually dropped 8.2 percent (1.7 percent at constant currencies) to €1.385 billion ($1.88 billion) for the period, suggesting effective cost controls and reductions.  “Lower gross margins from declining sales were partially offset by cost management initiatives, primarily reductions in marketing and overhead expenses,” Vivendi shared, hardly a morale booster.

On the year, revenues dropped 6.2 percent (actual and constant currencies) to €4.363 billion ($5.92 billion), and EBITDA slipped 15.5 percent to €580 million ($786.7 million).  That translates into a drop of 14.7 percent at constant currencies, driven heavily by declines in recordings.

Meanwhile, the digital picture continued to improve, though growth rates are slowing.  Overall, digital formats gained 8.4 percent on the year, a modest improvement compared to earlier years.  In other units, published gained a modest 1.7 percent, while the smaller merchandising improved 24.6 percent.

Report by Alexandra Osorio.