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France’s Vivendi, Italy’s Mediaset Join Forces to Take on Sky, Netflix in Europe

Rupert Murdoch and Reed Hastings just got a deep-pocketed rival in Europe.

The recent alliance between French conglomerate Vivendi and Italy’s Silvio Berlusconi-controlled Mediaset TV group is likely to spark a battle for subscribers that will be played out across the European media landscape.

French billionaire Vincent Bolloré, Vivendi’s chair and biggest shareholder, is looking to take on Murdoch’s Sky empire and Hastings’ Netflix streaming giant by combining a telecommunications company, TV outlets and scads of content into a yet-unnamed Southern European-based media mega-conglomerate.

“You see AT&T buying DirecTV, Telefónica buying Via Digital, etc. The integration of telcos and media content is the present and the future,” says Franco-Tunisian media mogul Tarak Ben Ammar, a Vivendi supervisory board member, who brokered the deal.

“The integration of telcos and media content is the present and the future.”
Tarak Ben Ammar

On April 8, Vivendi bought pay TV unit Mediaset Premium in a broader deal under which Vivendi and Mediaset each acquired a 3.5% stake in one other.

A central piece in Bolloré and Ben Ammar’s vision is Telecom Italia. Vivendi recently raised its stake in the telco to 24.9%, and now effectively controls it.

While there are many questions about the Vivendi-Mediaset plan, especially regarding the integration of the two companies’ free and pay TV outlets, speculation also exists concerning their respective production companies.

“I don’t think [they] are talking so much about building another Sky and trying to compete,” says Guy Bisson at London-based Ampere Analysis. “I think [they] are talking about: ‘Let’s monetize our production assets and access to content that will allow us to be flexible, and let’s do that using more cost-effective platforms, like OTT and SVOD.’ ”

Vivendi comprises pan-European production and distribution mini-major StudioCanal, Universal Music and multi-territory paybox Canal Plus, which has 11 million subscribers in places as wide-ranging as Poland, Vietnam and several countries in Africa, besides France. By adding Mediaset Premium, the subscriber total rises to 13 million, still far below that of Murdoch’s Sky, which has 19 million in the U.K., Italy and Germany.

Grow or Die
The combined scale of the StudioCanal-Mediaset Premium pay TV service is a challenge to Europe’s heavy hitters
13m Subscriber base
of StudioCanal-Mediaset Premium
19m Subscriber base of Sky across the U.K., Germany and Italy
150k Subscriber base of Netflix in Italy, six months after launch
$1.2m Projected subscriber base of Netflix in France this year

As for content, StudioCanal owns what is believed to be the third-largest film library in the world, while Mediaset, Italy’s top commercial broadcaster, is a film force thanks to its Medusa production and distribution unit. A priority of Vivendi/Mediaset is producing content to feed its outlets in France, Italy and Spain.

The companies also intend to create a European studio to produce content for export internationally.

With an eye to Netflix, Vivendi/Mediaset has announced plans to set up the first pan-European over-the-top platform by merging the Mediaset-operated Infinity services in Italy and Spain with Vivendi’s German OTT service Watchever. Ben Ammar says the combined service will be operational by the fall.

A few days after the Vivendi/Mediaset alliance was announced, Netflix held a presentation in Paris, where Hastings told Italian daily La Stampa he expected that the streaming giant would be present in one-third of Italian homes in seven years. In France, Netflix is expected to reach 1.2 million subs this year, according to a forecast by Digital TV Research. Says one Vivendi insider when explaining the combined OTT initiative, “The idea was, if we let [Netflix] get stronger, it might be harder to catch up.”

The Vivendi/Mediaset grand plan has its skeptics.

“Vivendi’s track record in innovating in pay TV with Canal Plus and OTT is not good,” cautioned Deutsche Bank media analyst Laurie Davison in a report, noting that the six Canal Plus channels in France have been losing money for the past four years and that their first foray into OTT outside France — Watchever, in Germany — “has failed.” Davison also noted that while there are “genuine synergies between Mediaset Premium and Vivendi’s pay TV and OTT operations, there is little cross-border synergy with Mediaset’s remaining free-to-air ops.”

Whatever the eventual success of the merger, one immediate effect Ben Ammar foresees is inarguable: Fiercer competition for content, he says, “will make directors, writers, producers and agents very happy.”

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