Vivendi SA announced a five-year plan to expand the reach of Universal Music Group by investing in digital channels, new countries and adding partnerships.
Universal Music’s Chief Executive Officer Lucian Grainge has agreed to stay on at the record label until at least 2020, the French media group said in a statement Friday.
Chairman Vincent Bollore is working to transform Vivendi, selling off the company’s telecommunications assets and making acquisitions in media and entertainment. Revenue at Universal Music rose in the first quarter after declining in 2014 as the company’s digital sales and improvements in its licensing business paid off.
In the next five years, Universal Music will invest in Africa, India and China, which are “high-potential markets for music,” and “accelerate the monetisation of music on digital channels.”
The plan may point to a shift to more paid subscription models, where labels and artists take home most of the subscription fee, instead of ad-funded “freemium” services such as Spotify Ltd., Liberum analyst Ian Whittaker said in a note. It also means that Vivendi is committed to Universal Music, and won’t sell or spin off the label in the near term, he said.
Vivendi said last week that it sold its remaining shares in Telefonica SA’s Brazilian phone company, exiting Brazil and further reducing its exposure to phone-company assets. The company’s already disposed of assets in France, North Africa as well as its holding in video-game maker Activision Blizzard Inc., freeing up resources to buy media and content businesses.
Vivendi rose 0.3 percent to 23.76 euros at 1:30 p.m. in Paris. The stock has gained 15 percent this year.
A weakening currency, rising inflation expectations and a desire to stay a step ahead of the Fed were among reasons cited by South African Reserve Bank Governor Lesetja Kganyago when he raised the policy rate for the first time in a year last week, to six percent from 5.75 percent.
The consumer inflation rate, which rose for a fourth month in June to 4.7 percent, is forecast by the central bank to peak at 6.9 percent in the first quarter of next year, and remain outside the three percent to six percent target for two quarters. The government projects the economy will grow two percent this year, after expanding 1.5 percent in 2014, the slowest pace since the 2009 recession.
The low growth rate means a steep rate-hike cycle is unlikely, said Jonathan Myerson, head of fixed-income investments at Cadiz Asset Management Ltd. in Cape Town. That makes longer-maturity bonds attractive at current yields, he said.
“The value is there,” Myerson said by phone on Thursday. “I certainly wouldn’t be running away from them. I would, if anything, be adding to my positions.”