Vivendi’s pay TV alliance with Italy’s Mediaset has a number of ramifications and is far more than an attempt to see off Netflix or compete locally with Sky Italia. It has the potential to create a major content owner and distributor in Europe’s Latin markets with a total customer base of over 18 million.
It is true that neither company is that well known elsewhere in Europe, with Mediaset confined to Italy, while Vivendi is one of those shadowy media conglomerates better known outside France for its properties, especially pay TV operator Canal+ and the Universal Music Group. Canal+ has 15.4 million pay TV subscribers in total distributed across France, Poland, Africa and other former colonies such as Vietnam.
Mediaset, founded in the 1970s by controversial former Italian prime minister Silvio Berlusconi, has 2 million subscribers for its Mediaset Premium pay TV service as well as being a significant rights holder, having been pushed into the red after spending €700 million for exclusive rights to broadcast Champions League football matches in 2014. Now the deal with Vivendi will allow Mediaset to focus more singularly on content and allow the former to handle distribution, according to Italian investment bank Mediobanca in a note issued ahead of the pact being finalized.
For Vivendi the deal is the largest part yet of its expansion strategy being pursued by its chairman Vincent Bollore and was not unexpected given his longstanding close relationship with the Berlusconi family. The deal involved a 3.5% share swap and sees Vivendi gain an 89% share in Mediaset Premium. At the same time Vivendi is also buying the other 11% from Telefonica. This reflects Vivendi having a market capitalization about six times greater than Mediaset, roughly $5.5 billion to $900 million, so that the Mediaset Premium stake makes up the difference between the respective 3.5% stakes.
But the choice also reflects each group’s priorities with Vivendi’s focus on pay TV. One of the first steps here for Vivendi will be to move towards a Europe wide OTT platform by merging Mediaset’s now separately operated Infinity Italy and Infinity Spain services with its own German OTT service Watchever.
Then Mediaset will aim to create a major European content developer and owner, embracing movie production as well as TV shows. As well as being Italy’s largest commercial broadcaster, Mediaset operates Medusa Film Group, the country’s movie market leader, while Vivendi has Studiocanal in France.
There is also a wider perspective as a European defense against the so-called GAFAN (Google, Apple, Facebook, Amazon, Netflix), which will involve the new group reaching out for alliances with Telcos and focusing on global licensing for rights. As part of this campaign, Vivendi has just launched a content production unit called Studio Plus, involving production of short-format premium international series for mobiles.
Naturally other broadcasters, operators and media groups will have taken note and the deal could well trigger a wave of consolidations. Vivendi itself has the resources to hoover up similar assets elsewhere in Europe to build up a position across the whole continent, which might point to ITV in the UK or ProSiebenSat.1 in Germany, given its absence from broadcasting in those countries.
The deal is also likely to have an impact on distribution and give a boost to satellite, or specifically Eutelsat. Currently Mediaset Premium is not distributed over satellite but Vivendi is likely to want to start going DTH to expand footprint and come into line with Canal+. Eutelsat is the main provider of satellite capacity over Italy for both public broadcaster RAI and Sky Italia, so suitable dishes are already widely distributed.