May 2001

Jean-Marie Messier has been on so many stages lately he is beginning to resemble one of the acts in the Universal Music stable. So far he's attracting some big crowds, but some would-be fans wonder if his deal-making abilities, which have seen him in pretty short order change a water and waste company into a global media giant, can be matched by an equal ability to manage it all.

So far the charming Frenchman with cherubic looks and an eye for a deal, is doing pretty well. In the last year Vivendi Universal's stock price has dropped from a high of 121 Euros to recent trading in the mid-70s. But unlike many of its peers, V-U has not revised its forecasts even as the stock market has dropped in the wake of the bursting dot com bubble. In fact at the time of V-U's first quarter results in March, Messier promised a 2001 revenue growth of 10 per cent and a growth target of 35 per cent for earnings before interest, taxes, depreciation and amortisation. But this is just the warm up. According to Messier the main event is still to come.

It's difficult to argue with a combo that includes one of the Big Five record companies, a Hollywood studio, TV production and channels, a stake (that will likely increase to control soon) in America's USA Networks, the biggest European pay TV operator Canal Plus, France's biggest publisher Havas, as well as a games and interactive content unit, theme parks, and an unproven but ambitious deal with mobile phone giant Vodafone. It's what one analyst calls the "ultimate convergence play."

Messier is first a strong believer in V-U's content businesses. Sensitive to concerns that Hollywood studios have burnt the fingers of non-US owners who tried to meddle with how things are done in L.A., Messier has kept the US studio management team largely in place. And for now at least, with Universal Pictures having brought in $1 billion in US box office revenues last year and shared in Oscars for hits like Gladiator and Erin Brockovich, there is little to complain about. Messier is also understandably an outspoken critic of online music piracy service Napster. He has not only thrown the legal book at Napster, but he has also formed a joint venture with Sony Music, called Duet, to sell properly copyrighted music online.

Meanwhile, Canal Plus has strict marching orders to trim its costs so it can stem four years of red ink and move into profit by 2002. Loss-making operations outside of France will either be sold or fortified by merging, which could see V-U's unprofitable Italian pay TV service Telepiu merge with the equally loss-making News Corp.-owned rival Stream. The big goal is by 2002 for Canal Plus to begin rolling out next-generation set top boxes, capable of storing downloaded video and, hopefully, of pumping up the pay TV company's revenues.

But it is the portal deal with Vodafone that Messier thinks will be the company's biggest hit. It is also the biggest gamble. The plan is to make Vizzavi the default portal on mobile phones, televisions and PCs for subscribers across Europe who are hooked into Vodafone and Vivendi's wireless and broadcast networks. This audience today is about 40 million subscribers across 14 European countries, with a further 35 million Europeans potentially receiving Vizzavi as part of a package or as a secondary service. Vodafone also has a 45 per cent stake in US-based Verizon Wireless, which could also elect to adopt the Vizzavi portal.

Vizzavi certainly has its work cut out. Yahoo!, Microsoft's MSN and AOL-Time Warner already have formidable presence in most European countries, ranking typically among the top five sites. then there are the web sites of the incumbent telcos like Deutsche Telekom's T-Online, Telefonoica's Terra Lycos and France TelecomÕs Wanadoo, all of which have dominant positions in their home markets and, in the case of Terra Lycos, in the US as well. Messier recently signed a distribution deal with Yahoo!, that could go some way toward giving V-U a foothold in the US market. But Yahoo! is in a somewhat precarious position at the moment with a new CEO Terry Semel who hails from Hollywood where he co-ran Warner Brothers studio, an over-dependency on on-line advertising and a weak share price.

Messier's plan is for Vizzavi to use its advantage in the wireless space to become the portal of choice as people begin to access the Internet increasingly from wireless devices. He's betting that with Europe's high penetration of mobile phones and a booming market for SMS, wireless Internet will likely be the mass market Internet in Europe. And as mobile catches on in the USA the appeal of mobile e-mail and other pay services should follow. But it goes beyond the mobile device to include all kinds of access devices from TV sets to PCs to, who knows, networked cars and refrigerators. So in this vision Vizzavi is a MAP or multi-access portal. "Multi-access is to make my life as easy as possible," says Messier. And the first step towards that goal is to create unified messaging across all devices, so one email address works on any device.

This is not a new concept, but Messier thinks it's a winner and, along with Vodafone, is putting muscle behind launching MAP across PCs and mobiles this October. By 2002, when Canal Plus has begun rolling out its next set tops boxes, the unified messaging will also be available from your TV set as well. Vivendi is not alone is thinking about how on-line portals take the next step. AOL Time Warner plans rapid expansion in Europe as part of a long-term goal to raise its international revenues from 17 to 50 per cent over the next decade. In Europe, AOL has about 5 million on-line customers, and it has also invested in Mviva, a wireless portal created by the European mobile phone retailer Carphone Warehouse that features AOL content. But although Europeans know AOL Time Warner's television channels such as CNN and Cartoon Network, and magazines like Time, the US company does not have the cable networks, dominance of the consumer publishing market and TV networks it boasts in the US. Messier notes that by July 1, the new official launch date of Vizzavi, the MAP should have 2 million registered customers in four European countries (the UK, Germany, Italy and France), up from 700,000 at the beginning of April. Vizzavi pushed forward the original launch date of Vizzavi from late last year when it became clear that the newer, faster GPRS phones would be delayed. "We may be wrong (about) the availability of new mobile handsets by six months and we may be wrong about the availability of new set top boxes by 3 to 4 months, but this (MAP) is the trend of the decade," says Messier.