French media giant Vivendi has upped its stake in Telecom Italia to 14.9%, making it the Italian telco’s largest shareholder. That move should give Netflix some serious pause for thought as it continues with its bid for international domination.
Contrary to some analyst opinions that the Telecom Italia move represents a return to the telecommunications sector for Vivendi, which has in recent months sold off its stakes in SFR and Maroc Telecom, the real significance behind the move is the enhanced distribution pipeline it gives the company. In other words, Vivendi is now in prime position to move forward more actively with creating a pan-European OTT rival that not only stands up to Netflix. It could well dominate it in certain markets.
In a statement, Vivendi revealed it had spent more than $1 billion increasing its initial 1.9% stake in Telecom Italia to 6.7%. That is in addition to the 8.2% of Telecom Italia it had received from Telefonica as part of the agreement to sell the Spanish telco its Brazilian unit GVT last year. Vivendi chief exec Arnaud de Puyfontaine also did not rule out Vivendi increasing its stake, and by extension influence, over Italy’s leading mobile and fixed-line operator.
What’s more, the deal struck with Telefonica last year over GVT also gives Vivendi access to Telefonica’s pay TV operations in Spain to distribute its content on. Telefonica completed its 100% acquisition of Canal Plus Espana, Spain’s biggest pay TV platform, from Mediaset Espana and Prisa in July last year.
So, in theory, Vivendi is now operating, or at least has access to, new pipelines in Italy and Spain. Where is Netflix launching in October? Italy, Spain and Portugal. In addition, Vivendi has, thanks to Canal + and StudioCanal, its own theatrical operations in the UK, Germany and France (where it is also the country’s pay TV leader).
Take into account the near $15 billion war chest Vivendi has to spend on content following a concerted campaign of asset divestment by chairman Vincent Bollore, and you have the type of formidable foe Netflix has yet to encounter internationally. Furthermore, Vivendi’s vast library of content, married to an increasing concern among the majors over Netflix’s increasing dominance in the sector, means that Vivendi will — should it wish to follow through with its own OTT service — offer consumers a wide and diverse array of content from day 1.
The Telecom Italia deal also opens up other partnerships with content creators such as Silvio Berlusconi’s Mediaset, which has already held informal talks with Vivendi execs about ways to collaborate together across both content generation and exploitation.
Netflix’s share price briefly hit an all-time high of $700 this week, as the SVOD juggernaut continues its international rollout. The irresistible rise of the company among investors has largely been fueled by its sheer ambition and fleet-footedness to enter new markets in search of growth. Just as it has announced plans to support its expansion with local language content — witness the ambitious French-language crime drama Marseilles — Canal + has also been making its own English and multi-lingual moves with co-productions such as Midnight Sun, The Tunnel and The Last Panthers.
Across Europe a wave of telco consolidation is taking place, which will have long-term and strategic ramifications on the media and content business. The likes of Telefonica, Vivendi and Telecom Italia have all been engaging in asset divestment or acquisition in recent months as the digital landscape continues to take shape. John Malone’s Liberty Global is continuing its international expansion by looking to acquire Ireland’s TV3, according to reports. Liberty is reputedly in exclusive talks to buy the Irish broadcaster, which is valued at $110 million. That’s on top of the rumoured play to acquire Vodafone, something Vodafone reps deny, insisting they are only looking at asset sharing. Liberty Global is the largest cable company in the world, with 27 million customers across 14 countries. Assets include Virgin Media, Unity Media and Ziggo. The company is looking to diversify its offering by owning more wireless assets so it can get into the quad play business: offering TV, landline phone, broadband Internet and wireless services.
Rumours also continue to swirl around the Murdoch family’s 39% stake in Sky. Reports that Vivendi and Vodafone were separately kicking the tires sent Sky shares briefly soaring this week by 5%. One other scenario mooted by analysts is the possibility of the Murdoch family themselves, through Fox, looking to complete a full takeover of Sky. Those plans were originally scuppered in 2011 following the hacking scandal, which engulfed News Corp at the time and made their move politically unpalatable. Now, however, with a potentially more sympathetic Conservative government majority in place, and the elevation of James Murdoch – former Sky chief exec and chairman — to Fox chief exec, a Fox takeover may be back on the table.
Let the games begin.
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