Vivendi Chief Says He’ll Crush Pirates

Jean-Marie Messier is not afraid of Napster.

The 43-year-old Frenchman who runs Vivendi is betting the bank that Seagram Co.’s giant record division can stamp out digital piracy simply by offering better service and higher quality audio files to music fans on the Internet. Vivendi will crush Napster and other digital counterfeiters, Messier predicts, by hawking “value-added” music subscriptions to the hits of Shania Twain and other Seagram stars online through mobile phones, personal computers and television.

So far, Wall Street is not convinced. Since the announcement last month of Vivendi’s $30-billion-plus acquisition of Seagram, stocks of both companies have floundered.

Critics wonder what Messier--a former civil servant who has spent his career in investment banking and environmental and waste businesses--could possibly know about selling music or other forms of entertainment online. There are also questions about what role 45-year-old Seagram Co. chief Edgar Bronfman Jr., who built the Canadian firm’s music business into the world’s biggest record company, will play in the new Vivendi organization.

In an interview at Universal’s headquarters, Messier and Bronfman explained their vision of the unbridled digital future and Vivendi/Universal’s best defense against music pirates on the Net.

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Question: You two just negotiated this humongous deal built on the premise that you can sell music online. Aren’t you anxious that digital piracy will gut the business?

Messier: Piracy doesn’t worry me. It really only works when there is no alternative. That’s why Napster is so popular right now. When you have only one service available, that’s what people have to use. But as soon as customers are given an alternative with higher sound quality and better service, that’s where they’ll go. Without question. I’m a music fan. I want quality and dependability. And that’s what we can provide that the pirates can’t. Not just better quality of sound, but value-added services. In the future, we will have access to all kinds of digital devices that will hook us up with hundreds of millions of people instead of the limited number that record companies now reach. Bronfman: Let’s step back a minute here. You can dress Napster up any way you want. But the fact is Napster takes other people’s property and gives it away. That means Napster is very limited in what it can offer. We, on the other hand, own a historic catalog of diverse music and have direct relationships with current recording artists. That gives us an edge on delivering higher quality music to our customers.

Napster has another problem too: Nothing in this world is free. When you get something for free, it just means somebody else is paying for it. How long do you think the people who are currently paying for Napster will continue to service it if they never get a return on their investment?

Still, we take copyright infringement very seriously. The press loves to write about how all the big music companies are in trouble. But this is not just a record company problem. The artists are in trouble too. In the end, the Internet itself will not survive if it becomes a haven for illegal activity. Copyrights must be protected online. I believe the courts will sort it out.

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Q: What makes you think people will pay you for music they can get free elsewhere?

Messier: To say people won’t pay for a high-quality music service just because they can get something inferior for free is ridiculous. That’s the same as saying that pay TV is going to die just because advertising-based network TV is free. Pay TV is gaining new clients every day, and that’s because it delivers a better service, a better atmosphere.

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Q: Seagram has spent millions of dollars developing a system to transmit music on the Internet and plans to launch the system next month, charging consumers $2 per download. Few people believe anyone will belly up to buy music at that those high prices.

Bronfman: Well, we’re starting out at a high price. But most models start high and work their way down. I think we’ve learned a lot over the last couple years but nobody knows yet whether digital downloads will be as attractive as subscription services. We’re a music company. We’re not a technology company. We made a lot of progress on our own, but ultimately the pace of technological change is so fast and the cost is so great, it takes a lot to keep on top of it all. That’s another reason why this marriage is going to be very helpful to us.

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Q: Will prices drop?

Messier: I don’t know any industry where you have lower costs and higher volumes that prices don’t fall. But all these questions about price will become less and less relevant in the future. Right now, you’re comparing everything to what a CD costs at your local record store. Tomorrow, prices will not be based on such a limited notion. What we’re talking about here is a future with unlimited options where music becomes a service. Would you like to preview the latest song by Shania Twain before it goes to radio? Or download the whole CD? Maybe you would prefer unlimited access to the entire library of New Orleans jazz music. What we will offer is an a la carte menu. In the end, you, the consumer, will decide exactly how much you want to pay--not us.

Bronfman: If you’re a monthly subscriber, maybe you’ll get to hear that new track by Shania for free. If you’re not, maybe it’ll cost you 20 cents to listen a couple of times. Maybe you’ll buy the single. Maybe you’ll buy the first four tracks. Maybe you’ll sign up for a Shania Twain subscription. The great thing about this deal is that we own content, distribution and aggregation. And so wherever the margins go, this company will have the opportunity to keep most of that value in the chain.

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Q: You are gambling that fans won’t just be downloading music through cable lines on their PCs but also using mobile phones and other portable digital devices.

Messier: It’s fair to say that Europe is far ahead of the U.S. in terms of wireless penetration rates. Let me give you an example of how it will work in terms of music. Let’s say a little girl wants to buy a birthday gift for her brother. All she has to do is turn on her mobile phone, pick a song and order it. She types in a little greeting on the touch pad and then downloads the song digitally to the TV set in her parent’s home. When her brother turns on the TV, it says, “Happy birthday, brother” and plays the song, which is then his to keep. That’s just one of hundreds of music services that multi-access [through telephones and TV] will bring to the music business. I know it seems hard to imagine in the U.S. right now because the wireless environment is not yet as developed.

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Q: So how far down the road is it before these kinds of digital transactions become a reality?

Messier: This is not some dream that is years off. We will launch our first music service in Europe before the year ends. We already offer 200 very localized services. We just started the program June 19. Take sports, for instance. Today in Europe, we give you running live scores for the most popular sporting events every night. Ticketing? Say I want to go see “Nutty Professor II.” In one click, I book my seat and a map appears on my screen that gives me the directions for the fastest drive to the theater. Traffic? It updates every 15 minutes. And we’re making tremendous progress on voice recognition.

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Q: People are using these services right now?

Messier: Yes. These kinds of services have been functional in Europe for some time now. This is no dream. And that’s the main message I want to impart here. This is not a fantasy. It’s a fact as we speak. Music is next. I promise you.

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Music on the Web

More Online

A special Times report with articles about the growth of music sharing on the Internet is at https://www.latimes.com/musicweb

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Coming Up * P.J. Huffstutter looks at the music industry’s difficulties in recruiting young technologists to help combat the giveaway of their copyrighted songs on the Internet.

* Chuck Philips talks about the issues facing the music industry with Time Warner President Richard Parsons, who will become head of the music division after his company’s pending purchase of EMI and its proposed acquisition by America Online.