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Canal Plus Deal with BeIN Sports Struck Down by French Anti-Trust Board

PARIS — Despite three months of heavy lobbying, Vivendi-owned Canal Plus Group’s distribution deal with Al Jazeera’s BeIN Sports was struck down Thursday by France’s anti-trust board, throwing a wrench into the pay-TV provider’s plans to return to profitability.

The board ruled that the $1.7-billion deal would give Canal Plus and BeIN control of 80% of sports broadcasting rights in France. That would harm competition, adversely affect financing of sporting events and threaten Internet service providers, the board said.

The decision represents a major setback to Vivendi, which has touted the five-year agreement with BeIN as one of the key elements of its strategy to turn around Canal Plus’ growing losses by 2018. Vincent Bollore, Vivendi’s chairman, has estimated that the paybox provider’s losses will amount to 400 million euros (about $456 million) this year.

Bollore was widely expected to try again for a BeIN deal by submitting another agreement for the anti-trust board to adjudicate in the summer of 2017. But someone close to the case said Canal Plus will neither appeal the decision to the Council of State nor come back to the board with another BeIN deal next year.

There was no immediate talk of shutting down Canal Plus’ pay-TV service, a drastic step that Bollore had warned was a possibility but was seen by many as an attempt to put pressure on the anti-trust board for a favorable decision.

Bruno Lasserre, the anti-trust board president, said the commission was not swayed by Bolloré’s threats to shut down Canal Plus and did not buy the idea that the BeIN deal could singlehandedly solve Canal Plus’ problems.

“We didn’t believe [the threats] very much. And we don’t think this agreement could have on its own restored the financial health of Canal Plus. It was very costly and was not the El Dorado that could have restored the profitability of Canal Plus,” said Lasserre.

Lasserre said Canal Plus’ “predatory” strategy was to offer very attractive pricing to consumers in order to blow away its rivals, then bring back regular prices once the field was cleared. Lasserre cited former rivals TPS and Orange as examples of pay-TV services that have pulled out of bidding for sports broadcast rights because of Canal Plus’ tactics.

Lasserre also said that the loss figures put forward by Bolloré were “meaningless” because they didn’t take into account the profit of CanalSat and Canal Overseas. “Canal Plus Group is a vertically integrated company, so one has to take into account the profits of all its divisions to get a real sense of its losses,” Lasserre said. “In the case of Canal Plus Group, it’s still a profitable entity even if the subscriber base of Canal Plus’ premium channels has been declining.”

After the ruling, the company said in a statement that it would “have to work on alternative solutions to stop the losses at the French Canal Plus channels.”

“Canal Plus is being cornered. The deal with BeIN would have been structurally beneficial and profitable. It would have allowed Canal Plus to gain subscribers,” said Jean-Baptiste Sergeant, media analyst at Paris-based MainFirst.

“We don’t see what plan B Canal Plus has to ride out the storm. The next batch of sports rights will be up for sale in 2019-2020, and by then prices will be even more inflated than they are today, and by then the competition might be even tougher,” Sergeant said, adding that Alice’s SFR — a current rival to Canal Plus — might even strike a deal with BeIN Sports, which is looking to cut its losses as well.

Sergeant said he, like many analysts, has doubts about the viability of Vivendi’s internationalization strategy. Jean-Marie Messier, the previous chairman of Vivendi, tried expanding the company internationally before and failed, Sergeant said.

On top of Telefonica in Spain, Vivendi now owns Mediaset Premium in Italy, but Sergeant argued that Mediaset Premium was itself struggling financially.

“Mediaset Premium lost 115 million Euros in 2015 and 150 million euros this year, mainly because of its acquisition of the Champions’ League,” Sergeant added.

Some media trades have presented Vivendi’s acquisition of Mediaset Premium as part of Vivendi’s master plan to launch a European rival to Netflix, with Telefonica in Spain, Canal Plus in France and Watchever, a Vivendi-owned SVOD service in Germany. But many analysts, including Sergeant, doubt such a service would be able to compete with Netflix which is already well established across Europe.

The negative ruling did not come as a surprise. In 2012, the anti-trust board banned Canal Plus from exclusive distribution of a premium channel such as BeIn Sports until 2017 because the paybox group had breached commitments during its 2006 merger with pay-TV operator TPS and had even been fined 30 million euros ($34.2 million) for its violations. In its ruling Thursday, the board made reference to that 2012 decision.

Canal Plus had hoped that the panel would let the ban run out in 2017 and that its deal with BeIN Sports would get the green light.

The agreement was initially envisioned as a five-year deal costing Vivendi 1.5 billion euros ($1.71 billion), or 300 million euros a year in minimum guarantees, according to French media reports. In return, Canal Plus would distribute channels from the Qatari group in exclusivity.

But because of the 2012 ruling from the anti-trust board, Canal Plus abandoned the idea of full exclusivity, allowing people to subscribe to BeIN Sport without also subscribing to Canal Plus or CanalSat. Canal Plus was then looking to handle and centralize all subscriptions to BeIN Sports instead of having third-party Internet service providers — such as Orange and SFR — handle them.

That would have given Canal Plus access to BeIN Sports’ 2.5-million-strong subscriber base and let it sell all subscriptions. But the plan reportedly did not go down well with either the Internet providers or the anti-trust board, said Jean-Baptiste Sergeant, a media analyst at MainFirst.

So far, sports remain one of the top two drivers, along with movies, of Canal Plus’s subscriptions. The pay-TV group still has rights to live-broadcast one first-pick game on each match day of the Champions League until 2017-2018, as well as the bulk of the French Premier League until June 2020 and the French rugby championship until 2023.

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