Vivendi Universal Signs Umg's Morris

NEW YORK -- With the ink barely dry on Seagram Co.'s merger with Vivendi SA and Canal Plus, the new company -- in one of its first orders of business -- moved to firm up management stability in its music division by signing Universal Music Group (UMG) chief executive Doug Morris to a new five-year deal. Financial tersm were not disclosed.

The re-upping of Morris comes just 2 1/2 years into the music executive's current contract but at a critical juncture for the new conglomerate, known as Vivendi Universal. Music, the growth engine of the old Seagram, is now expected to drive the cross-promotional opportunities that inspired the deal in the first place, matching the Universal music and film content businesses with Vivendi's distribution muscle online and via cellular phones.

"We have a better chance to aggregate people, and we have new distribution channels, which should bring our music to more people. And there are a lot of synergies that can be had between our music company and the Vivendi companies. They can layer our music over a lot of different things," Morris tells Billboard. "But by the way, if the music is no good, no one is going to care."

That's why Morris says that he expects his goal in the new regime to be the same one it has always been: developing more hits and continuing to improve UMG's musical brands.

Adds Morris, "We're entering a period that is going to be very, very positive for the music industry as a whole, and the company that has the greatest amount of music talent and executive talent is going to do the best."

While there is little question of music's importance to the new company, Morris' responsibility for UMG's growth under his stewardship—and how effective he will be—is up for debate. But music industry analysts on Wall Street say he certainly hasn't hurt the operation.

"To the extent that the music business continues to be on fire, and he's heading it, I would attribute some of that success to him," says Prudential Securities analyst Kathy Styponias.

What's more, some analysts say that with all the other major music operations in states of strategic uncertainty, Vivendi Universal is wise to lock up its top talent in such a core business .

"There are so few people who know what they are doing—you go with the people who basically look like they have an ability to manage a record company," says one Universal watcher. "Who knows in this business why things work, but as long as things work over there, you've got to believe he is part of the reason."

Just how volatile the merger is for Vivendi and Universal executives remains to be seen. The final hurdle in the creation of the new company was just cleared Dec. 8 in Paris when shareholders of French TV company Canal Plus voted to OK the merger. The vote was 99% in favor of the deal, following similar majority votes days earlier by shareholders of Seagram and Vivendi. At a special meeting Dec. 5 in Montreal, more than 90% of Seagram shareholders cast votes in favor of the deal. In Paris, 94% of Vivendi voters approved it. (A two-thirds majority was required in both cases.)

Investor approval came in the wake of antitrust clearance for the transaction by U.S., Canadian, and European regulators.

Morris says that for the music division, the merger will not be the "traumatic" event that the PolyGram deal was because the record company stays intact. Moreover, he says that with his new deal he expects to maintain a "winning culture" in the music management group he has created.

The biggest question mark at this point perhaps becomes Seagram CEO Edgar Bronfman Jr.'s future in the new entity and how he fares in his relationship as No. 2 to Vivendi Universal chairman Jean-Marie Messier.

However, Morris says, he has received assurances from Bronfman, whose family is the largest shareholder in the new company, that he intends to remain with Vivendi Universal and oversee the music and Internet businesses. "I expect to work very closely with Edgar," says Morris.

As for the issue of his contract, "it never crossed my mind," according to Morris, who says the new deal came within the last three weeks.

"It was not much of a negotiation; it happened in a minute and it was done," he says. "I have that kind of relationship with the management of this company. I really respect them and appreciate them, and they've done right by me."

The new Vivendi Universal—formed from the merger of Vivendi, Seagram, and Canal Plus—began trading Dec. 11 on the Paris Stock Exchange's CAC-40 index, where it is the fourth-largest company. Shares closed at 74 euros ($64.83) in heavy trading. U.S.-listed American Depository Shares, which trade under the symbol "V," closed at $65.

In other company news, Brian C. Mulligan has resigned as executive VP/CFO of Seagram. According to a statement, Mulligan—who will consult for Vivendi Universal—turned down "several opportunities" within the merged company.