Orange follows AT&T into original content but only pledges €100m

In the area where telecoms, media and Internet converge, technology allows network owners, ISPs, broadcasters and content owners to emulate one another, and so turn into different types of companies. Several recent examples have involved operators trying to become content owners. Verizon and AT&T have been making major acquisitions to boost their control of content, and ability to play in original content like Netflix, Amazon and Comcast. In the UK, BT has engaged in a multibillion pound battle with pay-TV provider BskyB to secure the best sports rights and has started commissioning original content.

Now Orange is going into the business of original content too. In March, it created a new entity, Orange Content, which it says it will run at arm’s length from the operator business. Last week was the first time new funding for the unit was discussed. Its remit spans the various Orange country operations, so it can advise across the board on all content negotiations and also bring together the efforts of movie production company Orange Studio, Orange Cinema Series (OCS) and post production firm OPTV (Orange Presentations TV).

The new subsidiary’s activities will take in strategic intelligence; acquisition of rights; the development of a new production unit together with Orange Studio and OCS; and the creation and evaluation of new formats – for this read virtual reality. In all cases, it will work with the Group’s various internal stakeholders and external partners, and monitor what is happening in each country’s lines of business.

But it has only put in €100m to fund French TV series for five years – our guess is that Netflix will spend more than that in France alone. The figure is less than the €179m ($206m) that OCS said it would spend over a five-year period on “French and European cinema” back in late 2013.

Of course, not every operator can afford to act like AT&T, buying a pay-TV company (DirecTV) and then following that up with the purchase of a major content owner (Time Warner, a deal which is still waiting for approval).

Orange CEO Stéphane Richard has tried to put it together in a way that will make the money last, added this funding to existing funds for its cinema series, as well as sharing content costs with partners like Canal+. To stretch the money the company will enter into some TV series co-productions and priority will go to investing in cinema. Orange says it will reinforce its relationship with Canal+ distributing Canal+ product through its TV channel. It will also offer a double play here of fiber with the new Canal+ offering, Essentiel.

In 2013, Orange Cinema Series had committed to invest some €179m over five years on French and European cinema and that funding is still in place.

Orange last year also signed a distribution deal with UGC Images, a subsidiary of Europe’s second-biggest cinema circuit, to kick off direct distribution operations in France and has now extended this to include the films which UGC Images will produce in 2018, showing on Orange just a few months after theatrical release.

Orange also said that it now had an exclusive partnership with French bookshop Fnac to bring the best of digital reading to Orange customers, which will kick off with the Izneo’s comic strip which gives unlimited access to over 3,000 comic strip titles on smartphone, tablet and PC/Mac.

Orange was one of the first European majors to invest in IPTV (Maligne TV) with a system that was initially defined by France Telecom and later sold on to Thomson, which markets it as Smartvision. It has labored to rival the largest pay-TV footprints in Europe, and still lags behind giants like Sky and Liberty Global, but has done a creditable job. So it didn’t need to buy the French equivalent of DirecTV (which might be Numericable) because it had already overtaken it. It is also true that in France there are stronger restrictions on buying your way to a monopoly anyway, than in the US.

In content it has been a longer, harder road, and Orange and all the rival French operators (Cegetel, Bouygues and Free) have had robust relationships with Vivendi’s Canal+. Orange began by buying sports rights, and then letting them go tamely, then started to acquire DVB-T broadcasting channels, and launched its Orange Cinema Series (OCS), which it pushed on mobile as well as TV. This is in effect a movie channel for France, but it is also available from Bouygues, CanalSat and SFR.

But growing all these activities from scratch imposes a uniquely Orange culture onto them, which would not be possible if Orange were to acquire Canal+, for instance, as AT&T hopes to buy Time Warner – companies with their own culture and approach. Orange Content will be led by David Kessler, the head of Orange Studio, and another Orange executive, Serge Laroye. They will report directly to Richard.

You can imagine that if the dominant operator in France is making these kinds of content moves, that other operators there feel compelled to offer something similar, and Altice stepped up this week to launch a new French premium TV channel dedicated to movies and TV series, called Altice Studio in a clear copy of what Orange has done with OCS.

The new channel will supplement existing entertainment services SFR Play and the French operator’s SVoD service as well as channels from NBCUniversal and Discovery, which are exclusive with SFR in France. Altice has also secured exclusive rights in France to screen top end soccer matches.

Altice is also emulating Orange with plans to set up its own online bank by early 2019, to challenge Orange Bank. Although there have been some teething troubles which have postponed the launch of Orange Bank (due on July 6), the market leader will certainly go live ahead of Altice (which owns Numericable and SFR). It has talked of extending quad play bundles to ‘quint plays’ which also include banking services, or wider bundles with choices of smart home, finance and car services in addition to voice, data, TV and mobile. Orange Bank will be built around its parent’s purchase of a 65% stake in French finance insititution Groupama.