War Games Make Up For Music Losses At Vivendi

Vivendi (EPA: VIV) has reported a strong performance in 2010 with huge sales of Call of Duty boosting earnings in its games division by more than 40%, more than countering a plunge of almost a quarter at Universal Music Group.

Universal Music Group, home to acts including Lady Gaga, Rihanna, U2 and Take That, saw earnings before interest, tax and amortisation plunge by 23.6% on a constant currency basis to €471m (£399m) last year. Revenues for 2010 fell 3.6% at a constant currency rate to €4.45bn, while digital sales increased by 13.8% year on year in 2010.

However when favourable currency movements are factored in full-year revenues at Universal grew by 2% with the company saying that a combination of digital sales, currency and merchandising “more than offset” declining physical product sales and “slightly lower” music publishing activity.

The company said that the double-digit drop in earnings for the full year was due to a change in “sales mix”, restructuring costs and writedowns from underperforming investments which offset benefits from operating cost savings.

A breakdown of Universal’s performance in the fourth quarter shows that revenue was up 2.2% to €1.5bn, although again earnings fell a considerable 31.3% to €227m.

By the end of this year a transformation plan under chief executive Lucian Grainge is expected to make savings of €100m.

Overall Vivendi, which owns assets including games maker Activision (NSDQ: ATVI) Blizzard, pay-TV firm Canal+ and telecoms operator SFR, reported revenues up 4.2% to €28.9bn and an earnings increase of 4.5% to €5.7bn. Net income rose 4.4% to €2.7bn.

Vivendi hailed the performance of Activision which saw revenues increase 4.4% on a constant currency basis to €3.3bn and earnings rose 40.7% to €692m. The company said that the “main driving force” was its games titles such as Call of Duty: Black Ops and World of Warcraft. Revenue from digital channels accounted for more than 30% of total revenues.

The company said that more than 12 million gamers have subscribed to WoW as of 31 December, while Call of Duty has achieved sales of more than $1bn (£600m) to date since launching sin November. Vivendi said that this year Activision would look to “reduce its exposure” to “low-margin and low-potential businesses”.

“Vivendi achieved good results in 2010,” said Jean-Bernard Lévy, chief executive of Vivendi. “All indicators improved compared to 2009. More than ever, customers of digital content and services lie at the heart of our focus”.

Levy indicated that despite tough conditions this year the company should see “slight growth” in earnings and maintaining a high cash dividend.

This article originally appeared in MediaGuardian.