1/19/02

Jean-Marie Messier - Episode #208 Transcript

Jean-Marie Messier
CEO of Vivendi Universal




The following is an edited version of Jean-Marie Messier's remarks at the Town Hall Los Angeles luncheon on January 19, 2002

Introduction

Jean-Marie Messier is Chairman and CEO of the French-based conglomerate, Vivendi Universal, the number two media and communications group worldwide. Originally, Vivendi businesses included environmental services, healthcare, and construction, but Messier was attracted to the entertainment world and took the company in a different direction. Mr. Messier focused Vivendi Universal's expansion into the areas of communication and media, specifically, telecommunications, publishing and multimedia, Europe's Pay TV channel and the internet. Jean-Marie Messier shares his views with the audience of Town Hall Los Angeles.


Vivendi Universal's Plans for the Future

I'm a great admirer of the United States because I've seen that American culture is not only welcoming to foreigners, but also to entrepreneurs, to those seeking to change the world, to change the economy and to those yearning to experience the American dream. I want to tell you a little bit who we are. Most of you are obviously more than familiar with Universal Studios and Universal Music. All the [inaudible] fantastic adventure is well-known by all of you. What we are at Vivendi Universal, we are Universal Studios, we are Universal Music, but we are much more than that. Who we are, we are a world leader. World, not U.S., not European. We are the world leader in key contacts, movies, music, but also games and education.

Why are we dedicated to be world leaders? Because in order to be strong today in the market, you need to be global and local. Because if you want to win market share, you'd better be strong and number one to strengthen this leadership provision. Because being in the contact business, the leader is the best and remains the best leverage vis-à-vis distribution. So we will definitely, and you will see Vivendi Universal continuing to strength its entertainment for fun. This world [inaudible] that's through the movies and USG last year made more than $100 million bucks in the U.S. box office. It was the movie "The Fast and the Furious", "Jurassic Park III", and "American Pie 2" and two others made more than $100 million dollars on the worldwide basis.

Universal Music Group is not only the most fabulous music group that you can find around the world, not only the world leader, but the leader in six out of the seven largest and strongest markets around the world. Because in music, you need to be both global and local. We are also a world leader in games and around L.A., in all California. We have studios [inaudible] and I hope that many of you, plus your children, are addict players of Diablo, [inaudible]. Good news. [inaudible] will soon be available. And be ready. We are preparing more.

But in order to define for you Vivendi Universal, we are strong in key technologies of the digital age and, for us, those key technologies are on top of the internet, Pay TV, digital TV and [inaudible]. We are the direct consumer group. Our business model is to build direct consumer relationships, which means a lot of subscriptions. Subscription revenues are basically half of our revenues. That's more resilient to recession and that's the best way to get the value of the catalog. So the characteristic of multiple companies in businesses that we are not only producing new products, we are leveraging wonderful, rich catalogs. We are global. Forty percent within the United States, sixty percent out of the states.

Why do you need to be global? You need to be global because first that's the best way to attract the best artists. When you are creator, you have one dream. I want to make the largest [inaudible]. If the group is offering me the best distribution around the world, the best chance to get the largest heat around the world, I have to deal with them. I have to work with them first. That's the reason why we are global. Being global is also the key advantage in terms of stability, efficiency of cost of distributions, but never forget that you need, at the same time you are global, to be local too because what we call between us globalization doesn't mean everything. Globalization? That's a mix of some universal successes -- I mean universal with a small 'u', not the brand -- universal successes plus a lot of requests for my identity, my cultural roots. So you need to be both global and local. From that point of view, I'm proud because I really think that we are five to ten years ahead of any of our competitors in terms of our ability to understand on the ground this cultural diversity.

May I come to perhaps the most important of all these definitions. We are believers in talents. We are very strong believers in talents. And we are movers. We aren't here one player in the States. If we have weaknesses, we will address them and I can make a promise the Vivendi Universal is a mover and will remain a mover. We like nothing more than to move ahead and to beat our competitors. What I've done by acquiring USA Entertainment assets is to permit more capital of the group to this industry and more capital of the group to L.A. At the time we bought USA Entertainment assets, we made a partnership with EchoStar. We made it with EchoStar because, as being the leading satellite in Europe, it was logical to make an alliance with the leading satellite provider in the States. So that's who we are.

We believe also in cultural diversity and that's very important because through all different products, all different contact activities, we touch hearts and minds all around the world, not only in this country, all around the world. And we as a team and I as the CEO, we do not take this responsibility of touching hearts and minds all around the world, we do not take the responsibility lightly. We take it more than seriously and we understand that, to fulfill this responsibility, you have on the one hand to promote your best products, your best artist, but you have at the same time to respect, to pay respect to every single culture around the world and to help promote all those cultures. That's value by itself. That's also value for the future of our group. And that's the reason why in our charter for values, when you look through Vivendi Universal website, for example, you will see that our first value is customers that any corporation needs to have. Our second value is cultural diversity and that's very important to us.

Perhaps, a final point, you may have noticed that I'm quite enthusiastic about my heading this group. Yes, I'm enthusiastic because this group has a tremendous potential on market shares on a worldwide basis. That's important enough to drive it. But I'm enthusiastic about the businesses. I'm enthusiastic about the people. I'm enthusiastic about the talents. I love our businesses. I love our people. I love our team. I think that's a tremendous chance of someone to manage such a rich group in terms of human resources, creativeness and talent. Universal, ladies and gentlemen, has been a core citizen of Los Angeles through Universal Studios and UMG. You can count on my commitment at Vivendi Universal now. We're going to be on top of Universal Studios, of Universal Music. Vivendi Universal is going to be a core citizen and a loyal citizen of L.A. in order both to grow our businesses in L.A. and to grow, expand and strengthen our commitment to L.A. communities. Thank you for your attention.

(Town Hall Los Angeles invited students from these organizations and schools to attend the speech and question the speaker afterward.)

Q & A

Q:
You talked about the importance of content for Vivendi Universal and of distribution, but Vivendi Universal is one of the few studios that doesn't own a broadcast network in the U.S. and, of course, there's a problem of a foreign company owning a broadcast network. I've been reading in the press that there are talks about a deal with NBC, a kind of a partnership, that could give Universal a broadcast outlet. What do you think about that? Do you think the broadcast outlet is a key outlet?

A:
I think that we all looked in the past to this industry and for this economy as being advertising-driven. When I'm looking to Vivendi Universal future, we will be less advertising-driven and more so [inaudible] and more direct access to consumers and subscription-driven. I think that when you look ten years down the road with all the competing technologies accessing to consumers with the ability to widen the offer to consumers, I think that the role of the broadcast network will be lower and lower, that their market share in terms of TV access to consumers will continue to evolve. Ten years ago, building a strategy without any broadcast network was a problem. Today, it's already possible to imagine it without it. In ten years, you will not ask any more the question.

Q:
My question concerns your transaction with USA. If I recall correctly from what I'm reading in the press, currently Vivendi Universal has an ownership stake in the some of the former USA's online properties, which include Ticketmaster and various other e-commerce sites. Going forward, how will you know when and if to go ahead and do a full acquisition of those properties?

A:
We made the trade-off in this transaction. We were a large shareholder of USA with no power. We made the decision, to a large extent, to integrate the businesses where we could have the most immediate synergies and new [inaudible] by bringing them together at the price of decreasing our level of exposure to USA interactive. My bet, my wish, there is that we are going to be give up [inaudible] on the interactive side the relationship through commercial agreements.

There is something that I did not mention publicly very often, but if we're able to organize and it doesn't require USA Interactive, if we were able to put together our V.U. net properties and we are the leader online with music access and the leader online in gaming with the interactive properties of [inaudible], together in terms of choosing with the audience, we would be ranked number four immediately after the [inaudible], immediately after a [inaudible]. That's a great chance if we play it correctly. There would be no synergies in the classical sense, let's say, taking out [inaudible] and so on by acquiring USAI Interactive to integrate it. There are tremendous synergies if we are able to build the right commercial agreement and, out of those properties, acting as a ring. So the focus there is clearly on the developing the commercial relationship with all USAI Interactive businesses.

Q:
I have a two-part question about Vivendi's competitive strategy. The first part is you mentioned in your speech that a key success factor would be being global and local. With a significant portion of Vivendi's revenue coming from France, what steps would you take to make sure that you were global and local in both markets?

And the second part of my question is you also stated that you had begun to address some of the weaknesses of distribution in the last year and you were ready for competition consolidating. A lot of the media companies that have consolidated have not really been as successful as projected, so what would Vivendi do to ensure that it continues to be successful?

A:
IToday we are acting in sixteen different countries and I'm not looking at V.U. as a Franco-American as much as to a U.S.-French group. We, really on the Pay TV side, for example, on the movie side in Europe, we are acting in eleven countries. In music, we are acting around the world in sixteen different countries. If you ask me what's going to be structure of Vivendi Universal in the coming years, I think that in five years from now, I do hope that we will still have the good forty percent of turnover in the U.S. I hope that we will have, let's say, close to fifty percent in Europe, but no more than half of that in France. Let's say a decrease of the French weight into our turnover and fifteen percent or so outside Europe and the U.S.

In competition and consolidation, my view is that the ability to create richness in an entertainment group is linked to your teams and to your people. The key indicator for me is are we losing people? Are we attracting people? All the key managers of the businesses that we have acquired stayed. We did attract people from the outside. The most recent one was no later than yesterday where the Human Resources guy from [inaudible] decided to come and join us. This is the key for me. It's an implication for the CEO which is that I'm not managing a hierarchal organization. I'm managing the fact that I know that. I know that it is time-consuming, but that it's also fun. I'm managing a team of number one. I do not want -- and when you see the original failure of many consolidation operations and many mergers, for me, that's because you have lost human resources skills and if you try to organize your company with a number one and number two and number three, when you have two number two and number three and you have to eliminate one of them, you are losing creativeness.

So the key point for me is to try to keep everyone onboard, which means to give them, on one hand, enough freedom, enough entrepreneurial spirits, to make them comfortable staying in a large group. And second, spending enough of my time gathering those people, to convince them that, by acting together, they are making a better job for the group and for themselves.

Q:
As a business school student, I would like to have your main three advices to become a leader as you are.

A:
The advice. I'm, from time to time, on a regular basis just seeing my office people and students who want to join the group. You are all in wonderful schools. That's good. That's more than good. What I'm going to try to understand are two things. The first one is are you able to play as team leaders and as team managers? As I was referring to, we can less and less manage the article of the organization. At the [inaudible] time, the one who holds information and doesn't share it makes a managerial error. So I'm going to test your team-building capacity and I'm going to test your enthusiasm because that's what I need. We need to be more creative, more reactive than our competitors. It means somewhere being absolutely passionate about what you can do.

So my advice here, if you have two qualities, focus on those two. Team-building and also enthusiasm, and I would add a third one. Never hesitate to take a risk or take a chance. If chance doesn't appear, you cannot grab it, but never hesitate to take a risk. There is a French poet, [inaudible], who said something which is my personal philosophy, which is (French phrase). I never tried it in English (laughter). It would mean put your chance on the table, grab your happiness and go to your risk. Looking at you, they will choose to look at you. That's the best advice that I can give you. If the chance comes, grab it. If you're happy, grab it. If you are not happy, change. If there is a risk to be taken, take it. Thank you very much. Thank you.

Well, I want to thank all of you for coming out. Questions were excellent. They were very, very thoughtful. I get a lot of questions generally after the speech and yours were outstanding. So thank you very much. This has been a real privilege for me.

We hope you found today's speaker enlightening and some of your questions answered. Join us next time for "Life and Times at Town Hall" where we'll continue to be a forum for the expression of ideas. I'm Val Zavala. Thanks for watching.

For information about membership and upcoming speakers, contact Town Hall Los Angeles at (213) 628-8141 or visit their website at www.townhall-la.org.