Hard Rain Might Stop Fallin'

By now, we're all well accustomed to hearing
about hard times in the music industry, which is why it comes as a
pleasant surprise to hear the head of Vivendi say that he expects his
Universal Music Group division to grow because the worst is over for
the recorded music business.

Universal's revenue for the first half of 2008 rose 5 percent from
the previous year to $3.1 billion, on $17.6 billion-worth of sales.
Last year, the entire recorded music business was worth $29.9 billion,
so this is a healthy figure. Vivendi head Jean Bernard Lévy (pictured
to the right) ascribes the success to a new willingness to license
non-traditional partners with new ideas about how to distribute music.

"We are working with all the big names in the field of internet, in the field of telecom equipment companies, big media companies and this is a big opportunity," he told Financial Times. "I really believe we are at the turning point for the music industry and I didn't say that two years ago."

Where's the gloom? Where's the doom? Those days are over, says Lévy. The sky is not falling after all.

"There is a strong likelihood that we are getting close to the lowest part of the cycle," he said, "and we are extremely active in developing new business models, new sources of revenues."

Universal Music Group, the largest record label in the world, is optimistic about its prospects. Unlimited music devices and networks such as Nokia Comes With Music and MySpace Music, which offer a large library of music for free or as part of another purchase.

Such deals frequently require licensors to pay large advances to the labels or even surrender equity to the major labels in return for a covenant not to sue. (MySpace Music, imeem and other services are owned in part by the major labels). These deals and others like them will bring about "a new era for the music business."

Not everyone thinks these deals willbecome a permanent part of the industry's rosy future. Former Warner Music Group executive Dan Pelson told us that he predicts that deal terms will get friendlier to music distributors within the next two years, and that companies that agree to the terms now could ultimately regret doing so.

Nonetheless, it's fascinating that the largest member of an dying once supposed to be dying is making more money than it did last year, especially as the rest of the world economy flounders.

By Eliot Van Buskirk for Wired.com

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