Andrea R. Vaucher: Eurotrack

PARIS — During Jean Marie Messier’s recent courtship of the press, the Vivendi-Universal CEO cautioned that Canal Plus had two years to get out of the red.

Though VU flacks insisted Messier was merely holding Canal topper Pierre Lescure to a timeframe Lescure himself had publicly set, Canal brass nonetheless felt betrayed.

In a country where dinner at eight means people trickle in at nine, Lescure’s two-year estimate was just that — an estimate — but Messier’s admonition gave them no leeway.

As the gap widened between the Vivendi and Canal camps, Lescure last month darted off an e-mail to Canal’s 3000 employees — which was quickly leaked to the press — refuting Messier’s charges that Canal was off its mark in terms of achieving its goals.

Though Lescure admitted the road ahead was bumpy, he stated that Canal’s losses didn’t reflect bad management, but rather heavy investments — in real estate and in the company’s high-tech research arm Canal Plus Technologies.

He rallied his troops to roll up their sleeves and get to work.

But it was hard to fault Messier’s thinking that Canal’s 11% decrease in subscribers and 500 million euro ($440 million) a year deficit didn’t reflect a management glitch.

That may partially explain why the Paris rumor mill has Messier further stripping Lescure of his Hollywood stripes and replacing him as VU co-chief operating officer with Agnes Touraine. She is presently president of VU Publishing and perhaps Messier’s closest ally in the VU empire, the person many believe he has chosen as his successor in the eventuality — as he told the press — he got “hit by a bus.”

With VU stock at an all-time low, the shareholders meeting in Paris on April 24 and the company’s trimester financial report due April 29, Canal employees are anxious to see what moves Messier has up his sleeve.

“Messier needs to make an proclamation that sends the message he’s in control and capable of reversing the company’s financial outlook,” says a Canal insider.

Not only is Canal losing money and subscribers, but it is burdened with a governmental — French filmmakers might even say moral — obligation to contribute 20% of its revenues to acquiring movies for its channels. In addition, the cost of nabbing sports rights is escalating as competitors emerge, and its Euro pay-tv operations, notably in Poland and Italy, are heavily in debt.

Can Canal reverse the situation?

“This year will not be a very good one for Canal Plus,” opines Merrill Lynch media analyst Neil Blackley.

But, he predicts, the paybox can pull itself together by 2004 with its second-generation media boxes, by increasing the average revenue per user, lowering the churn rate, streamlining Euro pay TV operations and reducing programming costs.

The company must move on other fronts as well:

  • Canal Plus must commercialize its new set-top boxes, and decide whether to charge for the boxes or give them away for free.

  • Canal is refocusing on the comedy programming that originally branded the paybox. Lescure recently brought back Dominique Ferrugia, a member of the original Canal team, to whip up a new production slate.

    Ferrugia is in negotiations with several French filmmakers to quickly create the short-form shows, and, if they work, will get filmmakers to make longer HBO-type series for September 2003.

  • Canal is also trying to lower the $132 million tab it has to pay to take over 47.5% of Jean-Claude Darmon’s sports rights’ org Sports Five.

    Bertelmann’s and Vivendi’s merger with Darmon will give all parties more clout in negotiating prices for sports rights.

  • Most ticklish, perhaps, Canal will try to renegotiate the 20% of its revenues that goes to film acquisitions, beginning with the 8% that’s consecrated to non-European cinema, (mainly American films).

However, the French are not going to let go of what amounts to 27% of all the money spent on French films without a huge fight, and bulldog orgs like the writers/directors/producers group ARP have already put on their battle gear.

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