VUG's 2005 earnings WOWed

Vivendi Universal's games unit goes from $241 million loss to $48.9 million profit in one year, thanks largely to Blizzard's MMORPG.

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This morning in Paris, Vivendi Universal announced its earnings for the calendar year 2005--and it was a good 12 months for the multinational media conglomerate. Overall income fell 16 percent to 3.15 billion euros ($3.75 billion), thanks to its 2004 sale of Universal Studios to NBC parent General Electric. However, year-on-year adjusted income shot up 55 percent to 2.08 billion euros ($2.48 billion), thanks to three resurgent divisions: mobile phones, music, and...games?

Yes, after a long slump, VU Games is back in the black, thanks to a whopping 244 million euro ($289.9 million) one-year jump in earnings. Whereas the division lost 203 million euros ($241 million) in 2004, it netted 41 million euros ($48.9 million) in 2005. Vivendi's overall earnings report said the game division's "dramatic and fast improvement in earnings from operations is the result of the strategy implemented since 2004." Specifically, it credited "lower costs resulting from the global turnaround plan."

Those familiar with VUG-owned developer Blizzard Entertainment can likely name one of the main reasons for the division's change of fortunes. The earnings report said the games group now has "a better balanced portfolio of products thanks to the tremendous on-line activity development with the exceptional success of World of Warcraft."

Just this week, Blizzard announced that WOW has exceeded six million subscribers worldwide. Despite being released 15 months ago, the massively multiplayer online role-playing game remains the number-two best-selling PC game in North America, according to the latest weekly sales figures from research-analyst firm the NPD Group.

Besides WOW, Vivendi's report also named several other games as being hits for the company. "Additional releases contributing to [VUG's] strong performance included 50 Cent: Bulletproof, Robots, [The Incredible] Hulk [Ultimate Destruction], F.E.A.R. and Crash Tag Team Racing as well as the North America distribution of Delta Force: Black Hawk Down and FlatOut."

Vivendi also underlined the fact that VUG's profit came in spite of the cost of several studio acquisitions and next-generation console development. "Earnings from operations included funding increased product development costs linked to recently acquired studios ( Radical, Swingin' Ape, Swordfish, and High Moon)," its report read.

On the Paris bourse, Vivendi shares rose 2.26 percent on the news, closing the day at 25.71 euros ($30.83).

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