Vivendi Bows to Experience in NBC Linkup - TheStreet

When Vivendi Universal (V) - Get Report talks about its plans for the future, it's hard not to think about the company's mistakes from the past.

It also makes one appreciate that, though the Paris-based company has taken a beating on its foray into the media business, its deal with

GE

(GE) - Get Report

to create

NBC Universal

is a sensible deal, even if it isn't the most lucrative of all possible outcomes.

Behind both of these themes lurks the idea that the entertainment rackets, like NFL football, are best left to professionals. A latecomer to the game might imagine that a fresh set of eyes can unlock opportunities that stuck-in-the-mud veterans can't see. But, as George Plimpton might have told you, brute force and hard-won experience are worth a lot more than vision untainted by tradition.

As investors in GE and Vivendi Universal absorbed the terms of their definitive agreement Wednesday, GE's shares fell 33 cents to $30.40, while Vivendi Universal's stock rose 4 cents to $19.25.

A Diller, a Dollar

Under the terms of the agreement, which was

announced in preliminary form more than a month ago, GE will merge its broadcaster

NBC

with

Vivendi Universal Entertainment,

the movie studio/TV producer/theme park operator that Vivendi Universal holds along with minority shareholder

InterActiveCorp

(IACI)

, headed by Barry Diller.

GE will end up owning 80% of NBC Universal, with VUE shareholders getting the balance, plus $3.8 billion in cash. Vivendi Universal will start to be able to extract more cash from the merged operation.

But as noteworthy as the deal is -- after all, it will create a new, TV-network-owning multimedia giant along the lines of

Disney

(DIS) - Get Report

and

Viacom

(VIAB) - Get Report

-- what's also interesting are comments made by Vivendi Universal Chairman Jean-Rene Fourtou Wednesday about a business that

isn't

part of the deal: Universal Music, a record label owned by Vivendi Universal separate from the VUE partnership.

Asked about the wisdom of not including the music business in the NBC Universal deal, Fourtou spoke with a measure of realism that Vivendi Universal sorely lacked when Fourtou's predecessor, Jean-Marie Messier, embarked on his hapless-in-hindsight quest to create a new media and entertainment giant.

Without saying as much, Fourtou indicated that it wasn't right to sell Universal Music now, given that the music business is going from bad to worse in part because of piracy and counterfeiting. The company, said Fourtou, needed to restructure its operations to be cash-flow positive under the assumption that the market will continue downward for at least another year, and perhaps two.

In addition, Fourtou asked the sensible rhetorical question that Universal and other major labels are trying to answer: Beyond the CD, are there other ways to distribute music? Part of that answer, is online.

A Multimedia Scholar

But where Fourtou seemed to veer off into Messier territory was the vision he appears to have for a business in which artists such as Eminem are symbols of a new culture. "Music for us is not selling CDs," Fourtou told analysts Wednesday. No, music for Vivendi is "to find, develop and market artists that become, you know, the symbol of a message and the brand of something."

Yes, that's true. In every generation, musicians -- whether they are Frank Sinatra, the Beatles or Britney Spears -- represent a lifestyle as much as individual pieces of music. But the lifestyle clicks with consumers only as long as the music does, and it's a lot harder to sell an amorphous lifestyle than it is to sell CDs or downloads or concert tickets.

Fourtou's vision sounds alarmingly like the strategies that Messier was proposing when Vivendi Universal was first created. A press release issued in October 2000 by the soon-to-become-Vivendi-Universal suggested such lifestyle-enhancing synergies as cell phone "music communities," mailbox personalization and ring tone services. Vivendi Universal also discussed the value of music to the cell phone portal Vizzavi: "Vizzavi can widen the opportunities to listen to Universal music -- and Universal music and film can enhance Vizzavi's features to drive adoption," said the company. "Music CDs will be used to ramp up registration and traffic and, in the future, they will offer the opportunity to access Vizzavi customized portals with artist features."

Vizzavi, if you aren't aware, was offloaded to Vivendi Universal partner

Vodafone

(VOD) - Get Report

, and effectively is no more. So much for the power of music.

More value, one would suppose, is to be found by putting media properties in the hands of people who know how to use them. Once NBC has control of its own movie studio, for example, it has an unquantifiable yet effective tool the next time it negotiates with Disney for broadcast rights to a movie from Disney's empire. Don't mess with us, goes the unspoken threat from NBC, or we'll mess with you the next time you want a Universal movie to show on ABC. Don't rough up my quarterback, or I'll send in my defensemen to maim yours.

There's the real value.