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Hit by Heavy Losses, Canal Plus Braces for Unfavorable Anti-Trust Ruling on BeIN Sports Deal

PARIS — Canal Plus is bracing for a ruling from France’s anti-trust board that could sink its five-year distribution deal with Al Jazeera’s BeIN Sports – a potentially major setback to the pay-TV provider’s plans to turn back a rising tide of red ink.

The agreement with BeIN, initiated in February, has been described by Canal Plus’ parent company, Vivendi, as an essential pillar of the group’s strategy to turn around escalating losses by 2018. Last year, the pay-TV service reported losses of 400 million euros, or $456 million according to Wednesday’s exchange rates.

A ruling by France’s anti-trust board on the legality of Canal Plus’ deal with BeIN is expected Thursday. Vincent Bollore, the boss of Vivendi — which owns Canal Plus Group, Universal Music Group and Dailymotion, and is a shareholder of Telecom Italia — has been lobbying hard for more than three months for a favorable ruling, going so far as to claim that he would consider folding Canal Plus’ six pay-TV channels if the $1.7-billion deal with BeIN did not go through.

Whether he would make good on that threat remains to be seen. Regardless, in taking up the case, France’s anti-trust watchdog has signaled its concern over what could be construed as an attempt by Canal Plus to gain a monopoly over sports broadcast rights in France. If the anti-trust board decides to put major restrictions on the deal – for example, if Canal Plus is required to share rights with other broadcasters – then the pay-TV giant is likely to back out.

“There are rumors circulating in France saying that the anti-trust board will impose tough restrictions, and if that turns out to be true, Canal Plus will take it as a ‘no’ from the board. Particularly, not being able to have the exclusivity on set-up boxes would clearly be a deal-breaker for Canal Plus,” said a source close to the case, who spoke on condition of anonymity.

The pay-TV group has been on the anti-trust board’s radar since 2012, when it suspended its approval of Canal Plus Group’s 2006 merger with pay-TV operator TPS, fined Canal Plus 30 million euros ($34.2 million) for breaching commitments and banned Canal Plus from exclusively distributing a premium channel, such as BeIN Sports, until 2017.

The agreement with BeIN Sports 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 keep a commission on 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.

Separately in 2012, Canal Plus lost four of the five UEFA Champions League media rights packages through 2015 to BeIN Sports, which Bollore says set the pay-TV provider on a downward path. He stated in April that Canal Plus’ pay-TV channels lost 180 million euros in 2014, 250 million euros in 2015 and 400 million euros in 2016. Those figures, however, have been widely contested because they don’t take into account the money-making multi-channel satellite service, CanalSat, Canal Overseas or Studiocanal, the company’s film and TV production and distribution arm.

Whatever the true scale of the paybox group’s losses, says Sergeant, much of those losses can be attributed to the skyrocketing prices of sports rights, which cost Canal Plus an extra 187 million euros to renegotiate within the last year. The inflation has been fueled by the emergence of deep-pocketed competitors, mainly BeIN Sports, which managed to wrest rights to most of the coveted Champions League and some of the French Premier League soccer games away from Canal Plus. Other players include Patrick Drahi’s Altice, which recently secured French broadcasting rights for the English Premier League, dealing another blow to Canal Plus.

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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