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UMG RESULTS

Merrill Lynch Gives UMG Healthy Fiscal Prognosis, Won’t Stop Mentioning "EBITDA"
In response to Seagram's music division's planned full-blown entry into the world of digital downloading, Universal Music Group's EBITDA is estimated to increase 50%, despite reports that the whole company's results during that period will be below previous projections.

"We project Q4 results for Seagram will be moderately below our previous estimates, with projected consolidated EBITDA of $420 million versus our prior estimate of $450 million," investment counselors Merrill Lynch said.

Driven by an estimated near-$85 million swing in filmed entertainment EBITDA and a 50% jump in music EBITDA, the company projected Seagram will post a solid increase in EBITDA for the third fiscal quarter. "We project healthy EBITDA growth in the quarter, led by filmed entertainment, music and recreation."

Merrill Lynch's report said music EBITDA is projected to increase 50% to $209 million vs. $139 million, which is still $16 million below prior estimates of $225 million.

The increase in music, the largest of Seagram's operating divisions, is due in large part to increased spending by E-Cat, the company's online division, including Farmclub.com and digital downloading expenditures, the report said.

The investment group expects UMG to launch secure digital downloading platforms in at least three countries by the end of the year, including the United States, Germany and the United Kingdom.

In addition, UMG continues to capture an impressive marketshare of current album releases, which Merrill Lynch estimates at 27%, followed by competitors BMG at 23% and Sony at 20%. Together, Warner and EMI captured roughly 20%.

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