You could be excused, if you were following Vivendi lately, if you thought we had slipped back through a time warp and gone back to the swashbuckling days of Jean-Marie Messier, who took the company out of the water-supply market in the noughties into TV programming, pay TV, broadband and cellular.
But the current leadership is merely reacting to a “series of unfortunate events” in its core businesses and is rebalancing the company with greater assets over a larger geographical region. Over the past few weeks’ French financial analysts are starting to see Vivendi as shifting from a conventional broadcaster towards becoming a new European Netflix, and perhaps going beyond that to include live OTT sports assets as well as online games.
The latest move has been a rumored bid for the virtually defunct pay TV business in Italy run by Mediaset. The established free to air business has been separated from Mediaset Premium which has been on the block now for over a year.
Mediaset Premium suffered terrible customer losses during 2012/2013 in the midst of the Eurozone crisis, when the Italian economy was considered almost on the brink of collapse. From a peak of over 5 million Italian homes holding a Mediaset Premium smart card, the number of active users fell away to today’s figure somewhat closer to 1.7 million.
After approaching Sky Italia for a merger and being rebuffed, Mediaset has continued to look for a partner to help share the burden of its planned pay TV recovery. After talks with Sky Italia broke down, it came out swinging in the middle of last year, insisting it will immediately push its customer base back to 2 million and take on Sky Italia. It had also promised to add DTH delivery from the same satellite that Sky uses, rather than continue to rely entirely on encrypted DTT which is growing expensive.
Suddenly it may have a buyer in Vivendi, which says that it has a €6.4 billion war chest to build a new empire with. Key to the Mediaset Premium deal is the fact that it has Italian rights to Serie A football for the 2015-2018 seasons, something achieved in combination with Sky, a partnership which raised legal suspicions at the time.
Vivendi has now made a bid for a majority stake in the business, says Reuters, although there has not yet been any confirmation of this.
Vivendi’s focus on Italy has already been established when it raised its ownership in Telecom Italia to 28% recently, and has engineered multiple seats on the board. If Vivendi was to create a series of OTT packages – movies, TV series, Italian Football and even online gaming thrown in – it is likely that Telecom Italia would be well disposed to become a distributor, and if Mediaset also became a distributor, it would be a straight fight with Sky, the only place in Europe where these two pay TV powerhouses go head to head.
Vivendi’s other major business is Universal Music, which is the largest cluster of record labels in the world, virtually unchallenged, with Sony and Warner Music its closest rivals. But its Canal Plus business is in serious danger, so much so that its lackluster performance led to major bloodletting at the French broadcaster recently.
The reaction in France has been to open negotiations with beIN sport, part of the Al Jazeera group out of Qatar, to get Vivendi its sports channel exclusive in France. While these negotiations have not been completed, you can see the thrust of where Canal Plus is headed. It wants to not only revolutionize its paid for Canal Plus TV channels, but also its CanalPlay OTT video service. Sky in the UK, Germany and Italy has a very similar asset base to Vivendi in TV, and both rely on satellite DTH delivery for the most part and both have experiments in OTT with Sky’s being conspicuously more effective.
Sky has turned this into a net growth in video subscribers, despite losing many of its sports exclusives in the UK to BT sport, relying instead on a burgeoning OTT service Now TV, and premium channels sold to Sky customers on its TV Everywhere system, Sky Go.
Not only are the Canal Plus TV channels losing subscribers, but since 2012 they have been losing money. The deal with beIN Sport would extend further and supply beIN with a strong potential paid distributor in France for its recently purchased Miramax studio as well.
On another front Vivendi is trying to get back into the gaming industry it departed when Activision Blizzard did a buy-back of Vivendi held shares, and reduced its dominance in the stock. Vivendi held onto 12% of the shares but sold them just a month ago at a huge profit, for $1.1 billion since the stock has doubled since Activision went its own way last year. It also got back a $400 million deposit on a hedge in the stock.
Vivendi has now launched a hostile takeover for a completely different French video game specialist, Gameloft offering €6 a share, a substantial premium on the existing price after it bought 30% of the company before declaring its intention to launch a takeover.
This is all against the backdrop of getting out of the hypercompetitive French cellular market in 2014, selling SFR to Altice for €17 billion, and a year ago it sold off its last remaining 20%. This is where the bulk of the Chairman Vincent Bolloré’s war chest has come from, that and selling the Vivendi’s 53% holding in Maroc Telecom to Etisalat back in 2013 for around €4 billion.
Vivendi could have simply got out of telecoms and focused on content, but many now believe it plans to offer OTT services across all networks, rather than owning them, and some believe it will be a European wide OTT network like Netflix. We suspect that with the games mix it will be multiple offerings.
It has a ton of cash, some great content and a brand which still lingers on in ex-partnerships in Spain and the Nordics as well as Poland where Vivendi still owns Canal Plus. It also holds about 1% of Telefonica in shares it won when selling off its GVT Brazilian unit, which may buy it a friend in Spain, for such a service, although that is less likely.
Finally, 9 months ago Vivendi bought the video channel Daily Motion which has put the OTT backbone in place, and which goes out to 35 countries in 18 languages, and Vivendi could simply full out its content offering into a bouquet of themed channels. This week it talked about extending that offering in Asia Pacific.
And just days ago Vivendi bought a 26.2% stake in Banijay Group, a distribution and production specialist with a footprint from Hollywood to London to Paris which has just merged with Zodiak Media, another French business which specializes in entertainment, factual, drama and kids content.
Bolloré may not have quite signaled his intent, but he is clearly getting his soldiers in a row for a major European assault.