Vivendi Universal plans to acquire Houghton Mifflin

Internet Strategies for Education Markets: The Heller Report, July, 2001

Vivendi Universal's (Paris, France, www.vivendiuniversal.com) proposed acquisition of Houghton Mifflin Company (HMCO, Boston, MA, www.hmco.com) will bring a new powerhouse player to the U.S. education content market, and ISEM expects the merger is likely to accelerate Houghton Mifflin's digitization of content. Vivendi Universal was formed in December of 2000 with the merger of Vivendi, Seagram and Canal+.

Vivendi has a stated goal of becoming the number one player in the five segments of its media and communications business (Vivendi also has an environmental services business). Those segments are music, publishing, TV and film, telecoms and Internet. The publishing business has five core markets: education, games, healthcare information, local services and business and general information. Education is covered in more depth later in this article. The games division is world #1 for online games, and world #2 for PC-based games -- a position attained largely through the acquisition of Havas. (Vivendi acquired both Havas Interactive and Havas Advertising, later selling the advertising unit. Part of that sell will finance the HMCO acquisition. Havas Interactive now operates under the Vivendi name.)

The music business is conducted though Universal Music Group, which produces, markets and distributes recorded music throughout the world; manufactures, sells and distributes video products; and licenses music copyrights in 63 countries worldwide. The TV and film business produces and distributes motion picture, television and home video/DVD products worldwide, operates and has ownership interests in a number of cable and pay TV channels, engages in the licensing of merchandising and film property rights and operates theme parks and retail stores around the world. The telecommunications business includes mobile and fixed telephony, Internet access and data services and transmission, principally in Europe. The Internet division also manages strategic Internet initiatives and new online ventures throughout Vivendi Universal.

Vivendi is clear about its desire to leverage the expertise of their various divisions to provide content across multiple platforms, including print, multimedia, the Internet, and PDAs. At the Houghton Mifflin press conference, for example, Jean Marie Messier, chairman and ceo of Vivendi Universal, stated that MP3 won't just be for music anymore (Vivendi acquired MP3.com in May).

Internet Education Activity Ahead

The acquisition can be expected to step up HMCO's and Vivendi's education-related Internet offerings considerably, but none of the players can address that issue directly during this period of nondisclosure. Messier did state that the acquisition "will put us in an excellent position to capitalize on the growth of the education sector by leveraging the content and technologies of both companies across all of Vivendi Universal. Our priority is to develop the most attractive and compelling content offering on all devices and platforms for our consumers." He added that digital television is a top priority for the company, and everything must be produced in a digital format. Specific to education, Messier stated in the press conference that technology has made education global and it is now possible to leverage global education products with local content. Vivendi's leadership in gaming and access to popular characters through Universal studios also has the company enthusiastic about edutainment.

Vivendi's Education Offerings

Vivendi Universal's publishing division already has a global presence in the education market as a leader in France, Spain and Brazil and a very strong market share throughout Europe and Latin America. That market includes educational CD-ROMs as well as books. Vivendi's education division includes such brands as Larousee, Nathan, Anaya and Coktel (Adibout). The acquisition of HMCO will move Vivendi Universal Publishing's worldwide position in the education field from the #5 spot to the #2 spot. The purchase will also give the company an instantaneous position as a leading publisher in the U.S. Vivendi does have an existing presence in the U.S. education market through Knowledge Adventure (Torrance, CA) and Educational Resources. With the acquisition, these companies will report directly to HMCO as the U.S. base of operations for education.

Vivendi's most prominent Internet education offerings to date are the Education.com portal and the Electronic Schoolbag. Education.com is an international site launched last February in English, French and German with content localized for different countries. A Spanish language version is expected in 2002. The site addresses education needs of children, parents and teachers with educational resources. At the portal's launch, Vivendi defined it as a project with a $25 million investment aiming to break even by 2001. Revenue streams break out as 44% subscription, 46% direct sales and 10% advertising. The site allows parents or teachers to browse articles, resources such as learning activities and archives for free. Free registration gives greater access to resource and content for adults and children. Users can also purchase premium educational services or products from the Education.com store.