Music Boosts PFE
Polygram wing fuels expansion into pic biz
Though the company benefited by its ongoing restructuring begun almost two years ago, which has helped reduce costs, its growth in its music arm still outpaced the marketplace.
Overall, the conglom reported a 17% increase in net sales and an 11% boost in operating profit for the full year; while fourth-quarter sales grew by 23%, operating profit rose 18% and net income increased by 14%.
Polygram Music Group posted a 17% rise in both sales and operating profit during a year in which the domestic marketplace rebounded slightly, but sales in many international territories were very soft.
For the fourth quarter, Polygram's music arm posted a 22% rise in sales to 9.3 million guilders ($4.55 million) and a 19% boost in operating profits for the full year to 1.3 million guilders ($630,000).
Net sales for the full year on the film side rose 16%, to $833,000, but PFE still posted a loss of $53.4 million as a result of hefty investments in the arm's distribution business and acquisitions, such as the $225 million purchase of the CDR film library and a co-financing pact with Castle Rock Pictures to fund as many as 15 films over the next three years.
"Even though the music marketplace overall had a difficult year, we still managed to get significant growth out of a business that grew very little during the year," Roger Ames, prexy of Polygram Music Group, told Daily Variety. "Because of our strength in both local and international repertoire, we were able to weather the (soft) climate better than most (of our competitors)."
Albums leading the conglom's worldwide sales charge included the Mercury Records bow from Hanson, "Middle of Nowhere," which was Polygram's top seller with 8.4 million units and the band's Christmas disc "Snowed In," which added revenues from the sales of 2.6 million units to the conglom's coffers.
Italian tenor Andrea Bocelli's Polydor disc "Romanze" logged 6.8 million units, while U2's Island Records album "Pop" eclipsed 5.5 million copies.
The music group's international standout came from Japanese band Glay, whose album "Review" was bought by more than 4.5 million fans and was Japan's biggest selling disc in history.
Polygram Music also benefited by the stabilization of its domestic record label management, with Danny Goldberg closing his second year at the Mercury helm and George Jackson getting the Motown Records reins last year and hitting the ground running with a slate of projects entering the marketplace.
However, a new Island Records management team was installed late last year and a chief for its Stateside music publishing arm still is being sought.
Top draws on the film side include the successful launch of "The Game," Polygram's first self-distributed pic in the U.S., which furthered its goal of becoming a full-service Hollywood studio.
PFE hits included "Bean," which has grossed $225 million in worldwide box office; "Sleepers," with $178 million in worldwide gross, and the $85 million-grossing "The Game."
The company's homevideo action was robust with sales of "Lord of the Dance" and "Fargo" vids adding to coffers. Upcoming pics include "The Gingerbread Man," "The Borrowers" and "The Proposition," among others.
"As in 1997, our film slate also is weighted to the second half," said Alain Levy, prexy and CEO of Polygram. "For (1998) as a whole, we feel we have an exciting lineup of music and film releases and we are optimistic about the outlook."
Levy said the economic uncertainty in Asia had "a small impact on our 1997 sales," but a greater impact may be felt in 1998. He said the company has increased its provisions for returns and bad debts and is "well-positioned to combat the problems in Asia."
