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Vivendi: A media star on the rise
New York Bureau
Sunday, January 27, 2002
NEW YORK -- Talk about taking advantage of your opponent.
Not only did Vivendi Universal Chairman Jean-Marie Messier gobble up J.R.R. Tolkien's publisher Houghton Mifflin Co. last summer, but his game unit struck a deal with Tolkien Enterprises to license a line of "Lord of the Rings" video games.
Now the French tycoon is positioned to benefit handsomely from the marketing might of rival AOL Time Warner Inc. each time it rolls out another movie in its already successful franchise.
Few Americans had even heard of him a year ago, but Messier is gaining name recognition fast.
In a dizzying shopping spree, Messier, 45, forged a $10.3 billion deal late last year to merge Vivendi's Universal film studio with USA Networks' cable channels and TV studio. He then named USA Networks' Barry Diller, a Hollywood insider who knows his way around Wall Street, as his new CEO for entertainment. At the same time, Messier shelled out $1.5 billion for a stake in EchoStar Communications, the nation's second-largest satellite company.
This gives him a base of more than 6 million subscribers for any new cable channels. And if EchoStar's planned merger with General Motors Corp.'s DirecTV is approved, that could soar to 17 million subscribers.
What's Messier's ultimate goal? To win bigger market shares in key areas, such as film, music and personal electronics, until Vivendi becomes the world's leading media group.
But Messier will have to knock AOL Time Warner from its pedestal first. And that won't be easy.
Then again, no one thought Messier could transform a company that started life a century and a half ago managing Parisian sewers into the world's second-largest media and entertainment conglomerate.
"Vivendi is a mover and will remain a mover," Messier told a recent business forum in Los Angeles. "We would like nothing more (than) to move ahead and beat our competitors."
Microsoft Corp. is the company most often cited as AOL Time Warner's biggest rival. But analysts point out that Microsoft is a technology company using media to further its goals, while both AOL Time Warner and Vivendi are media companies using technology to further their goals.
"Vivendi has very much copied its strategy to match the strategy of AOL Time Warner's," said Eric Paulak, a Sweden-based analyst with Gartner Research. "I'd say AOL Time Warner's real competition isn't Microsoft, but Vivendi."
The two conglomerates have a lot in common.
Both own a movie studio, cable channels, an online music service and even a ticket agency.
"The two companies are evenly matched, but with different strengths," said Vernon Keenan, an analyst with Keenan Vision Inc.
AOL Time Warner benefits from a stable of magazines that includes Time and Sports Illustrated. Vivendi benefits from its Home Shopping Network and theme parks.
Still, Vivendi has major holes in its U.S. holdings. For example, although Vivendi has the USA and Sci-Fi cable channels, they hardly compare with CNN, HBO and other cable programming owned by AOL Time Warner.
And, at least in the United States, Vivendi lacks an Internet service provider that matches America Online's power to attract millions of eyeballs.
But the breathtaking pace at which Messier has transformed the sleepy French utility once known as Compagnie Generale des Eaux can't be discounted.
The son of an accountant, Messier once served in France's Finance Ministry, overseeing the privatization of state-owned businesses.
He joined Compagnie Generale des Eaux in 1994, ascending to CEO by 1996.
It was in Canal Plus -- a TV holding that finances much of the French film industry -- that Messier recognized the beginnings of an empire.
Messier has said that America Online's announcement in January 2000 to purchase Time Warner made him realize he'd have to acquire like crazy.
He didn't waste much time, striking a deal in December 2000 to buy Seagram's American movie and music properties for $34 billion to create Vivendi Universal. He later purchased Houghton Mifflin and online music service MP3.com. His country was so proud of his business acumen that it made him the recipient of the Legion of Honor, France's most prestigious award.
Still, Messier underscored his company's future in America when he moved his wife and four of his five children from Paris to a $17 million Park Avenue apartment last summer.
Analysts say they wouldn't be surprised if Messier next made a bid for NBC, the last remaining network not owned by a huge media company, or for an Internet service provider such as Atlanta-based EarthLink Inc.
"EarthLink is a very well-run company and could be an attractive asset to a company like Vivendi," said John Corcoran, an analyst with CIBC World Markets.
Other analysts say Messier might even forge an alliance with Microsoft's MSN service.
"MSN needs more content, and it needs more reasons for people to switch from AOL," Keenan said. "MSN and Vivendi share a common enemy in AOL Time Warner, so a deal makes sense."
Messier has ruled out any significant acquisitions in 2002, saying he plans to concentrate on integrating what he's already acquired. He has boasted that Vivendi would achieve 20 percent growth in cash flow this year.
AOL Time Warner won't comment officially on Messier or his plans for Vivendi.
But in the past, AOL unit chairman Barry Schuler has said he's not worried about the competition. He said there's room for more than one company when it comes to the digital transformation of American households.
"It will take lots of companies with innovative ideas taking part to make this revolution happen," he said.
Analysts say Vivendi's one advantage over AOL Time Warner is its global reach.
Vivendi owns not only Canal Plus, but also Telepiu, an Italian pay-television platform. Messier also recently launched Vizzavi, a joint venture with Vodafone Group that will deliver content over cellular phones and the Internet.
Messier said he plans to market Universal Studios' films, Universal Music Group's songs, and television properties from USA to consumers around the world.
Pivotal to his vision is wireless technology that would, for example, let consumers download songs remotely for a fee, simultaneously updating a database of their interests. In this way, a buyer might be invited to reserve a seat at the artist's next local concert.
Messier also hopes to launch the first U.S. satellite channel dedicated to European films in 2002.
You may contact Shelley Emling at [EMAIL PROTECTED]
Vivendi at a glance
2000
Summer: Market value was $63 billion.
December: Paid $34 billion for Seagram, a Canadian beverage company that also owned the Universal music and movies businesses.
2001
March: Paid $140 million for U.S. online game giant Uproar.com.
August: Paid $2.2 billion for educational publisher Houghton Mifflin Co.
August: Paid $372 million for MP3.com Inc., an online music-sharing site.
December: Paid $1.5 billion for a 10 percent stake in U.S. satellite-TV broadcaster EchoStar Communications Corp.
December: Paid $10.3 billion for USA Networks' film and television arm.
Before making its U.S. purchases, Vivendi already had vast holdings in Europe, including a large stake in the French telecommunications carrier Cegetel. It operates Europe's biggest pay-TV service, Canal Plus and Italian pay-TV service Telepiu. It also jointly owns Web portal Vizzavi with Vodafone Group. And Vivendi owns a majority stake in its now separately listed utility, Vivendi Environment.
Source: Vivendi
