23
Annual Report -
2013
-
Vivendi
Group Profile |
Businesses
| Litigation | Risk Factors
1
Universal Music Group
2.2.6.
Regulatory Environment
UMG’s businesses are subject to the laws and regulations of the
countries in which they operate.
In 2000, in the United States, certain UMG subsidiaries entered into a
Consent Decree with the U.S. Federal Trade Commission (FTC) under
which they agreed that for the following 20 years they would not make
the receipt of any co-operative advertising fund for their pre-recorded
music products contingent on the price (or price level) at which such
products are offered for sale.
In 2003, following a lawsuit filed by the FTC, the FTC issued an order
that generally prohibits UMG from entering into agreements with
unaffiliated entities to fix, raise or stabilize prices or price levels for the
sale of audio or video products in the United States and any agreements
with such entities to prohibit non-deceptive advertising for audio or
video products in the United States.
In 2004, in the United States, a UMG company entered into a Consent
Decree with the FTC under which it agreed to comply with the provisions
of the Children’s Online Privacy Protection Act and to maintain records
demonstrating compliance.
2.2.7.
Piracy
Piracy materially harms the music industry and impedes the development
of new business models. The IFPI (International Federation of the
Phonographic Industry), which represents the phonographic producers
(labels and singers) worldwide, estimates that 26% of all Internet users
still regularly access unlicensed sites. Working in conjunction with the
rest of the music industry and other entertainment sectors (including
the movie and games industries) and across other sectors (via initiatives
like the International Chamber of Commerce’s BASCAP), UMG takes a
multi-pronged approach to combating piracy, including:
supporting the development and launch of innovative services
across a number of platforms, as well as the continued growth
of existing services such as iTunes, Spotify, Google and Vevo.
UMG works with partners collaboratively to ensure music can
be accessed legitimately on all new platforms such as mobile,
tablet computers, in car, game consoles and in the home,
offering consumers the best, fully comprehensive digital music
experience; and
working with governments and online intermediaries (such as credit
card companies, advertisers, search engines, proxy services and
ISPs) to reduce potential profits from piracy and ensure adequate
enforcement. For example, UMG has participated in programs with
ISPs to educate consumers about the wide availability of legitimate
downloading services and provide warnings to those using illegal
services.
2.2.8.
Competition
The profitability of a recorded music business depends on its ability to
attract, develop and promote recording artists, the public acceptance of
those artists, and the success of recordings released within a particular
period. UMG competes for creative talent with other major record
companies both for new artists and for those artists who have already
established themselves with another label.
UMG also faces competition from independent labels that are frequently
distributed by other major record companies. Although independent
labels have a significant combined market share, no single label has
material influence over the market.
The music industry competes for consumer discretionary spending with
other entertainment products such as video games and films. In recent
years, UMG has been facing greater competition for shelf-space, due to
declining CD sales and continued consolidation of the retail sector in the
United States and Europe.
Finally, the recorded music business continues to be adversely affected
by piracy, in particular illegal downloading from the Internet (please
refer to Section 2.2.7 “Piracy” of this chapter).
2.2.9.
Research and Development
UMG’s exploits opportunities for digital distribution and protects
its copyrights and those of its artists against unauthorized digital or
physical distribution. UMG created Global Digital Business, a new
media and technologies division within its structure, which analyses and
studies emerging technologies applicable to UMG’s operations, such as
technological defenses against piracy and new physical formats.
