Vivendi cuts losses with MP3.com
Owen Gibson
Wednesday July 9, 2003
Fourtou: forced through closure of MP3.com
Cash strapped French media giant Vivendi Universal has closed the European arm of MP3.com, the online music site that it bought for £265m two years ago.
Its decision to dump the expensive acquisition is part of its ongoing purge of the excesses of former chief executive Jean-Marie Messier.
The site, which was worth over £3bn at the height of the dotcom boom, will close on August 8 with around 20 redundancies in Europe. The US arm of the site has been placed up for sale, although analysts are doubtful whether a buyer will be found willing to operate it as a going concern.
Leanne Sharman, the vice president of sales and marketing at MP3.com Europe, said that while it was performing well operationally and had built up good relationships with advertisers and record labels, the decision was down to "corporate strategic reasons".
"We have started to generate significant revenues and now we have got to that stage it is a shame, there's general disappointment among staff and in the industry generally," she
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The timing of the decision is unfortunate for MP3.com, coming just as legitimate music download services such as Apple's iTunes have finally started to take off.
The closure is part of chief executive Jean-Rene Fourtou's efforts to reduce Vivendi's debts following a huge acquisition spree by his predecessor Jean-Marie Messier, which last year drove the group to the brink of bankruptcy.
Mr Fourtou plans to wipe out the majority of Vivendi's £12bn debt by auctioning off the company's US entertainment assets, which include Universal Studios, the Sci-Fi channel and its theme parks, and concentrating on its French telecoms and broadcasting businesses.
It is understood that the Vivendi Universal board originally hoped to find a buyer for MP3.com Europe, but with few offers forthcoming have decided to close it down and sell off the domain name separately. The US version of the site will remain up for sale in the hope that a buyer can be found.
MP3.com was originally launched in 1997 as one of a number of sites that allowed music fans to download music for nothing over the internet. It later became one of the first illegal sites to reach a settlement with the major record companies and concentrate on legitimate downloads
Recently, it has been concentrating on providing marketing solutions to advertisers through its network of users and persuading record labels to use it as a promotional tool through which to push new releases.
The site was part of Vivendi Universal Net, the white elephant that was once seen as the key to Mr Messier's vision of creating an integrated media company delivering its content over the web.
"MP3.com's expertise will be a tremendous advantage, especially in the digital distribution of all Vivendi Universal content and the creation of common technology platforms," the former Vivendi chief executive said in April 2001 when he paid £265m for MP3.com.
Another key part of the unit, mobile portal Vizzavi, was sold to joint venture partner Vodafone last year for £90m.
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