Actually, the earnings story was even more sour. EBITA cratered 38.2 percent to 68 million euros ($86 million); 37.7 percent at constant currencies. That matches the third-quarter of 2009, though both represent lows over the past two years. “This is going to be a tough, challenging industry for a few more years,” Vivendi CFO Phillippe Capron noted.

But why the digital decline? A simple explanation would be that paid downloads are simply past their prime. In the US, Nielsen Soundscan data reaffirms that a plateau is starting to edge towards decline, after years of strong percentage growth. But Vivendi actually pointed to strong download growth, ‘particularly outside of North America,’ and largely blamed softening ringtones for the broader digital decline.

Back to the broader financial picture, this is a patch that is getting rougher, though the “few more years” comment is reassuring. Vivendi appears ready to tough this one out, and the presence of a benevolent corporate parent is good news for Universal. In fact, it may allow the label to float for a few years while critical transformative shifts continue.

The action is happening through Mobile Connect, a platform that also taps integrated platforms like Twitter and Facebook. That opens the avenues to a highly-engaged, passionate audience, one frequently underserved – and misunderstood – by media companies and advertisers alike.

The deal is focused on direct-to-consumer channels, and tools of the trade will include text updates, mobile sweepstakes and online widgets. “Until now, we have been unable to find the right platform that would enable us to meet the needs of this heavily mobile-active fan base in their native language,” commented Skander Goucha, senior vice president of Digital for Universal Music Latin Entertainment (UMLE).

Dorrian Porter, CEO of Mozes, also played point on the deal.

But independent label licensing is also proving tricky. According to a confidential memo unearthed by Music Week, serious differences also surround negotiations with indie consortium Merlin. “Although we are deep into negotiations with Virgin Media, we do not believe we have yet reached a point where Virgin Media’s offer in our view acceptably values a collective license to our members’ repertoire,” the letter reveals.

But Virgin is plowing forward, and pointing to an eventual launch. Just recently at the Ideal Home Show in London, Virgin Media head of media relations Asam Ahmad noted that the service is “well progressed,” according to a report by Digital Spy. But Ahmad acknowledged a complicated rights licensing discussion, and declined to offer a concrete timetable.

Hits is also showing surprisingly equal year-to-date market shares for both Universal Music Group and Sony Music Entertainment, at 28.7 percent apiece. Warner Music Group is tracking far lower at 14.8 percent, down from 16.1 percent in Q109, also according to Hits.

This is a top-heavy game, and Sony is benefitting from Susan Boyle and Sade blowouts. Warner Music Group is also gaining a substantial chunk of its revenues from bigger releases, as reaffirmed during its latest quarterly earnings call. Next, Nielsen may be weighing in with its own first-quarter tallies, a nice data comparison opportunity.

In Los Angeles recently, Spotify CEO Daniel Ek talked about the halo effect that artists can experience on the application.  Cultivating fans in far-flung countries, generating upswings in related, non-recording purchases.  A return towards the album, and beyond that, a ripe community of downstream API developers.

Bloggers were lapping it up, even predicting an imminent launch in the US.  But Edgar Bronfman is over freemium, over the idea that somehow freebie music communities convert towards premium in a meaningful way.  Even in Europe, premium subscribers are a small percentage of the Spotify total (less than 4 percent), despite the swell of publicity and demand.

And, for that matter, advertisers are hardly banging down the door – while testing at Midem, the French version was mostly filled with Spotify ‘house ads’ and plugs for label content.  In a similar test last summer in London, the British version suffered a similar problem.

That was an issue Amanda Marks of Universal Music Group publicly raised last year.  More recently, Edgar Bronfman said it out loud, dismissing the freemium approach in no uncertain terms.  The quote has been hashed and rehashed, but neither are playing the tech-chic popularity contest.  They need to license concepts that make money, not win praise from Spotify worshipers and ‘with it’ bloggers.  At this point in the game, looking cool is an expensive endeavor.

But the buoyant hype around Spotify has a deadweight counterpart, an underachieving sibling that rarely gets mentioned these days.  As the drool drips on Spotify, a once-promising Rhapsody is getting spun off, zipped up and mailed away by RealNetworks and MTV Networks.  Even after millions in commitments and huge amounts of advertising.

Yet, subscribers slumped towards 675,000 at the end of last year, a drop of 13 percent year-over-year.  The number itself is hardly zero, but nothing near the initial expectations heaped upon it – and the broader subscription space – in the early 2000s.  Yet this is quite an excellent application, one that was well ahead of its time – but ultimately, a niche play.

So, what again is the difference between Spotify and Rhapsody?  Sure, Spotify is freemium, and Rhapsody starts the conversation with premium (limited trials and teasers notwithstanding).  But strip away those models, and the apps are quite similar.  Rhapsody was just as dazzling in 2002, just like Spotify splashed onto the scene in 2008.  But Rhapsody was always locked in its cage, away from freebie paws.

And maybe that’s the point.  The history on Rhapsody (and similar competitors) is all-too-familiar to Bronfman and other executives looking at the same problem.  And simply flipping the model around on the cloud hardly seems like the solution.

Paul Resnikoff, Publisher.

Separately, sources to Hits Magazine pointed to a splash event at Skylight Studios in lower Manhattan, and participation from leading independents, brands, and other advertising agencies.  That was later confirmed by an email from Vevo, which additionally pointed to an upcoming presence across vevo.com and youtube.com.

Currently, the venture involves Sony Music Entertainment and Universal Music Group, though others are expected to join at a later date.  YouTube is powering the backend video technology.

Outside of launch and partner specifics, the challenge for Vevo is to find a way to better monetize music videos online.  That means sloughing away CPM-unfriendly elements associated with user-generated content, including affinity issues that emanate from loosely-regulated uploads and distasteful comments. Whether Vevo can create a neater, cleaner, and safer environment for advertisers remains unclear, though everyone involved has a great deal to gain from the effort.