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"We believe that Yahoo could be the privileged partner of Vivendi Universal and vice versa. We have other content. Let's discuss this other content with Yahoo."
——VU Chairman Jean-Marie Messier

VIVENDI UNIVERSAL CALLS YAHOO "PRIVILEGED PARTNER"

Media Company’s Plans To Expand On Pact With Portal Stop Short Of Buyout…So Far
The recently inked Vivendi Universal-Yahoo deal for the online distribution of music may be taking on new dimensions, as those involved are entertaining thoughts of expanding the pact to include other media formats.

According to The Wall Street Journal, VU hopes to broaden its two-week-old music-licensing deal with Yahoo to encompass movies and television shows.

The move is seen as a bid by VU-Yahoo to match the distribution clout of the more vertically integrated AOL Time Warner, the paper said.

Broadening its deal with Yahoo to areas other than music would enable Vivendi to reach consumers through a wider array of channels in the U.S., where its distribution network is for now limited to movie theaters, traditional retail outlets and cable TV network USA, the Journal explained. By contrast, top competitor AOLTW already is in a position to pipe its films and TV shows straight to people's homes through the AOL Internet-access service and its vast network of cable lines. Owning its distribution platforms also enables AOL Time Warner to cross-sell and cross-promote each of its products to a wider audience.

VU Chairman Jean-Marie Messier, in an interview with the Journal, spelled out his vision of the partnership with Yahoo that stops short of a takeover.

"We believe that Yahoo could be the privileged partner of Vivendi Universal and vice versa," he said. "We have other content. Let's discuss this other content with Yahoo."

During his talk with the Journal, Messier served up previously undisclosed details of his company’s music licensing deal with Yahoo. Under the terms of the agreement, according to the talkative executive, Yahoo will make the Duet music-subscription service, a joint venture between VU’s Universal Music Group and Sony, available on its website in exchange for a take of "well below 20%" of revenue.

That 20% figure is notable because it is significantly lower than the 40% take that Napster has put on the table as part of its proposal to the music industry to use its pipeline as a subscription service. Napster’s deal was agreed to by investor Bertelsmann’s BMG but rejected by the other music giants. Additionally, RealNetworks reportedly has a 40% interest in MusicNet, a rival online music subscription alliance between AOL, Bertelsmann and EMI (hitsdailydouble.com, 4/6).

As part of the Duet-Yahoo deal, Messier said Yahoo's take of the revenue will increase once it has signed up 500,000 paying subscribers to Duet and rise again once the Web portal has signed up 2 million subscribers. The Journal says that while the deal is nonexclusive, Vivendi will make Yahoo its preferred promotional outlet on the Internet, Messier added.

Although the partnership between Vivendi, Sony and Yahoo will compete with MusicNet, Messier said he was in favor of striking a cross-licensing deal with the members of the other alliance.

"At the end of the day, our music has to be distributed on AOL and vice versa," he said. "That's what consumers want."

Such a cross-licensing agreement has been rumored and expected when the majors respectively lined up, and formally announced these alliances a few weeks ago.

Since Yahoo named Terry Semel as its CEO last week (hitsdailydouble.com, 4/17), rumors have swirled that the former Hollywood executive would steer the troubled company towards a buyout. However, in his interview, Messier played down such speculation, saying that for now VU was only interested in "a soft alliance" with Yahoo.

But, Yahoo spokeswoman Nicki Dugan said, "As with all of our content partners, we're always open to exploring extending our relationships in ways that benefit consumers."

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