Universal Music sees record profits in 2007

By Yinka Adegoke

NEW YORK (Reuters) - Universal Music Group Chief Executive Doug Morris said on Tuesday he expects 2007 to be a banner year as new albums from top-selling artists hit the market and digital revenues start to contribute new income.

Morris said he expected the world's largest music company, owned by French media giant Vivendi (VIV.PA: Quote, Profile, Research, Stock Buzz), to post its best-ever revenue and profit in 2007, even as CD sales continue to decrease at a rate that is difficult to forecast.

"You can see there are myriad streams of income starting to come into the record companies," Morris told the Reuters Media Summit. "We're going to make money from MySpace, we're going to make money from YouTube, we're going to make money from Zune ... we will make a tremendous amount of money from telephones."

Since the late 1990s, the music industry has struggled with falling CD sales due to pirated music and the growing popularity of digital media players like Apple Computer Inc.'s (AAPL.O: Quote, Profile, Research, Stock Buzz) market-leading iPod.

Record labels have argued that they should have a bigger share of online music growth, such as getting a slice of sales of digital music players or related online advertising.

Universal scored an industry first this month when it struck a deal with Microsoft Corp. (MSFT.O: Quote, Profile, Research, Stock Buzz) to receive a fee for every Zune digital player sold. The Zune, launched on November 14, is Microsoft's answer to the iPod.

Morris said on Tuesday that Universal may try to negotiate with Apple for a similar royalty fee for the iPod when their next round of negotiations commence in early 2007.

"It would be a nice idea. We have a negotiation coming up not too far. I don't see why we wouldn't do that ... but maybe not in the same way," he said, when asked if Universal would want to replicate the Zune deal with Apple.  Continued...