EXCLUSIVE: When Vivendi finally closes its deal with Mediaset, described by insiders as an “industrial alliance,” in what should be the next few days, the result will be a media giant right in the heart of Europe. The deal as currently envisaged will see the companies swap a 3.5% stake in the other, each get a member on each other’s board and, most importantly, Vivendi will run pay TV arm Mediaset Premium. That would give Vivendi access to free and pay TV operations in France, Italy and Spain, the latter through its relationship with Spanish telco Telefonica, which owns Canal + Espana.
That TV infrastructure in the key Western European territories should herald a new era of multi-territory content acquisition, creation and exploitation, creating a formidable competitor to Netflix, which is aggressively expanding in Europe, as well as pan-Euro pay-TV giant Sky.
Vivendi likely won’t stop there. While it does not appear to have expansionist TV ambitions in either the UK or Germany — two major territories where its film unit Studio Canal operates — there is a likelihood that Vivendi will add theatrical and home entertainment distribution operations in Spain and Italy. That would create a genuine global giant based out of Europe in Studio Canal, with direct distribution in the UK, France, Benelux, Germany, Australia as well as Spain and Italy, in addition to Vivendi’s Universal Music Group.
Studio Canal said yesterday at MIPTV it had acquired minority stakes in three banners: the UK’s SunnyMarch, co-founded by Benedict Cumberbatch; Urban Myth Films, also based in the UK; and Spain’s Bambu. The move is part of a drive to grow TV revenues from 15% in 2015 to 25% of the overall going forward. Each deal includes a distribution agreement. The company already has stakes in or fully controls Red Production Company, Tandem, Sam and Guilty Party.
It also complements the other corporate moves Vivendi has been making of late, namely consolidating its control over Telecom Italia, in which it now owns 24.9% after investing some $4 billion. While some analysts have questioned Vivendi’s return to the telco sector — it had previously sold SFR, Maroc Telecom and Brazilian unit GVT — the move into Telecom Italia is squarely centered around content distribution and exploitation.
Telecom Italia inked a distribution deal with Mediaset last year to sell former Prime Minister Silvio Berlusconi’s media group’s content to Telecom Italia’s subscribers. What’s more, Italy suffers from the worst broadband penetration of any other developed western European company. With the Italian government now seeking to remedy this as a priority, that leaves huge growth potential for Telecom Italia shareholders thanks to the virtual fixed-line monopoly it enjoys.
“You’re talking about millions of fixed-line cables in Italy,” says a Vivendi exec. “You should see Telecom Italia as a cable company that needs content, so this is really a media play. It is imperative today to offer audiences quadruple play if you’re going to survive. It’s not just about mobile and broadband. You also need the content to keep the customers.”
That’s a similar approach to the one John Malone’s Liberty Global is taking. The world’s largest cable company, with 27 million customers across 14 countries, has been acquiring assets including Ireland’s TV3, Virgin Media and Unity Media as it diversifies its offering by owning more wireless assets so it can get into the quad-play business: offering TV, landline phone, broadband Internet and wireless service.
Vivendi in February also officially launched its hostile takeover for French video game publisher Gameloft — founded by France’s Guillemot brothers, who also own Assassin’s Creed maker Ubisoft, another Vivendi target. Vivendi has been steadily increasing its stake in both Gameloft and Ubisoft for some months now. Gameloft’s board rejected the first offer on the grounds that Vivendi’s takeover was not in the best interests of the company and “does not have a single business that could offer Gameloft synergies.” That hasn’t deterred Vivendi chairman Vincent Bollore, who returned days later and increased the offer to 7.20 Euros per share from the previous offer of 6 Euros per share. That would have valued the company at around 610 million Euros, or $660 million. Gameloft shares jumped almost 9% to 7.40 Euros a share on news that Vivendi was coming back for the company. At the time of writing, Gameloft is trading at 7.35 Euros per share.
Earlier this year, Vivendi also closed a deal with Qatari-owned beIN Sports over an exclusive distribution agreement in France. The move, if approved by anti-trust authorities in France, would give Canal Plus execs a much-needed revenue boost while also giving beIN Sports better carriage in France.
The two companies had been fierce rivals up until that point. By aggressively snapping up major soccer, tennis and rugby rights from 2012 onwards, beIN had positioned itself as a big rival to the French pay-TV giant, potentially even an existential one, as sliding Canal Plus subscriber numbers were behind an exec cull at the company last summer. Canal Plus chief exec Rodolphe Belmer, chairman Bertrand Meheut and a number of other execs were all shown the door in quick succession. That was largely due to the board’s dissatisfaction with their efforts to stem the tide of falling revenues.
BeIN execs closed a deal to fully acquire Miramax last month. Studio Canal already has a long-term worldwide home entertainment distribution deal in place, alongside Lionsgate, for the Miramax library. It is not inconceivable, longer term, to envisage greater synergy between beIN and Vivendi over Miramax, particularly if the relationship in France proceeds smoothly and creates trust between the parties.
What’s more, it sets the stage for Vivendi to move forward with its plans to deliver a pan-Euro over-the-top system that can take on Netflix as well as, longer term, prepare itself in the event of the entry of non-traditional media platforms such as Apple and Google. Vivendi finalized its acquisition of online video channel Dailymotion last June, presenting a ready-made platform on which to expand into OTT delivery. Add to that Vivendi-owned German SVOD platform Watchever, which Vivendi re-launched in September last year, and the pieces are starting to form the strategy Bollore has been working on for the past few months, aided by close ally and Vivendi board member Tarak Ben Ammar.
Ben Ammar has been instrumental in mapping out Vivendi’s media strategy over the past year. A longtime associate of Bollore, Ben Ammar is also a board member in Telecom Italia (as well as the Weinstein Co.) and has close ties with both Berlusconi and his Mediaset group. He has been key in putting together both the strategy and the deals to cement Vivendi as a major player across Europe.
If the Gameloft — or Ubisoft — deal or deals come off, that would leave Vivendi with TV, film, music, video games and sports under its umbrella across a range of platforms.
In essence, the world’s first non-U.S.-based multi-media studio.
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