H’w’d studio called to Gauls

Canal Plus, Vivendi close in on U

PARIS — A mood of excitement overtook French pay TV player Canal Plus Wednesday, as company head Pierre Lescure’s long-cherished dream of acquiring a major Hollywood studio came a step closer to reality.

Canal Plus and its controlling shareholder, the French utilities and media conglom Vivendi, confirmed talks were in progress with Universal’s owner Seagram to acquire the Canadian company’s movies, music and drinks business for $30 billion. Vivendi, many on both sides of the Atlantic insisted, primarily wanted to get its hands on Seagram’s giant Universal Music group. Music and audio streaming will be key as Vivendi rolls out its wireless and Internet strategies.

At Canal Plus, widespread enthusiasm for the deal was summed up by one exec, who trumpeted: “It’s not that easy to acquire a major these days, there are not many of them for sale. We are thrilled by what this deal could mean. It will put Canal Plus in a much stronger position in the worldwide market.”

Fears that Universal execs might have to bow to the French way of doing things were groundless, another senior source promised, saying that if the deal goes through, the studio’s new French bosses did not intend to give anyone in Hollywood lessons in moviemaking.

Moreover, in its dealings with Euro territories outside France, Canal Plus had already proved its ability to respect cultural differences and local expertise, the source pointed out, adding, “I don’t think we believe French execs can run Universal. It’s just a question of respect for people who know how to do their job. There are a lot of brilliant people already over there.”

One French exec who knows Vivendi topper Jean-Marie Messier well said, “I wouldn’t be surprised if Messier is slightly frustrated with the reality behind all this talk of creating a European studio, and decided, if you want a studio, why not do something simpler and bolder and just buy a proper one?”

He continued, “Jean-Marie, after all, has a truly international vision, and quite an Anglo-Saxon one. He will not try to change Hollywood at all. He’s a very pragmatic guy. I’d be surprised if he tries to impose the French way of doing things. He’s very Franco-French in the way he operates himself, but he’s new generation in the way he recognizes that companies can only be successful if they operate according to their own center of gravity.”

On the Paris stock market, shares in Vivendi fell Wednesday while Canal Plus shares rose slightly. One French analyst said that on Vivendi’s side the deal was interesting but rather risky and very much dependent on execution. It’s no secret that investing in a Hollywood studio is a high-risk proposition.

And the structure of the transaction remains hazy and complex. Most seem to think that Canal and Vivendi will merge, with the new entity absorbing Seagram. Vivendi and Seagram are expected to shed their non-media related assets. Rumor has it that members of the Bronfman family, which owns Seagram, will buy back the company’s historic liquor business. The family would also become the single largest shareholder of a combined Vivendi-Seagram.

Mixed reaction

Outside of Canal Plus and France, the Euro reaction to the acquisition was ambivalent — excitement that a major Hollywood studio could fall into Euro hands, but also concern that Vivendi could abandon its plans (via Canal Plus/StudioCanal) of building a true European studio. Ironically, Europeans also kicked up a fuss several years ago when Seagram/Universal acquired U.K.-based Polygram Filmed Entertainment as part of the purchase of Polygram NV.

Canal Plus tried hard to buy PFE from Seagram back then, teaming up in an unsuccessful bid with Artisan Entertainment.

“In theory it could be a bad thing for Europe, because Canal Plus will be Americanized,” said one leading Euro film exec.

And if Vivendi buys Universal, where does that leave StudioCanal?

StudioCanal was set up to be a Euro studio, with pan-European distribution integrated with local production. But this now seems redundant — why go ahead with setting up distribution if Vivendi now has UIP? Universal just signed a new five-year deal with UIP — it isn’t going to back out of that.

StudioCanal’s future

Somewhat perplexed financial analysts Wednesday were also mulling the effect of the acquisition of Universal on StudioCanal, Canal Plus’ production and distribution arm that was listed on the French stock market as a separate entity barely two months ago.

The primary mandate of the StudioCanal distribution network was to handle the big Hollywood movies it was planning to co-finance. UIP, the distrib mechanism that Universal has used for years, is clearly a natural home for these pics.

That might leave StudioCanal with local or specialized films to release, but why bother? StudioCanal has barely got out of the starting blocks in setting up its infrastructure. It has distrib arms in France, Germany and Spain, but these are still small, indie-style and unproven. It has not yet got anything in the U.K. or in Italy.

Together U (with some of the old Polygram execs) and UIP have a growing commitment to backing local and specialized films, which is probably already further advanced than anything StudioCanal has.

There doesn’t seem much sense in running StudioCanal alongside Universal. A strong bet is that the best elements of each would be integrated together. Some of StudioCanal’s local production and international sales presence mat be rolled into U.

That skepticism, however, was dismissed by a senior source at StudioCanal, who maintained that an operational rapprochement with Universal would be a “win-win situation.”

“Neither one is going to absorb the other. Canal Plus wants to create a major. StudioCanal is the European studio of that major,” the source said.

(Jill Goldsmith in New York and Adam Dawtrey in London contributed to this report.)

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