Streaming, Sub Services Sustain Vivendi’s Universal Music Group

Vivendi pacts with Al Jazeera’s beIN Sports, launches play for mobile games maker GameLoft

Taylor Swift Grammy Awards
Matt Sayles/Invision/AP

PARIS – Launching two of the top three U.S. albums of 2015 – Taylor Swift’s “1989” and Justin Bieber’s “Purpose” — Vivendi’s Universal Music Group, the world’s No. 1 company in recorded music, saw revenues edge up 2.7% in 2015 to €5.1 billion ($5.6 billion) — thanks to a 43% hike in subscription and streaming revenues, Vivendi announced Thursday as it presented full-year 2015 results.

Addressing an analysts’ conference Thursday evening in Paris, Vivendi CEO Arnaud de Puyfontaine reiterated chairman Vincent Bolloré’s insistence on a drive into content, plus distribution and media, in partnership with telcos such as Telecom Italia and Spain’s Telefonica as the cornerstone growth strategy at one of Europe’s biggest content and media groups.

The elephant in the room remains Netflix. Driving into content, such as soccer rights, Vivendi is now attempting to ward off accumulating global competition, including Discovery-Eurosport, which snagged European rights to the Olympic Games in 2018 and 2022 in France and the U.K.

Vivendi’s increased investment in original programming will reduce dependency on external content, De Puyfontaine said – which could be bad news for major product suppliers such as Hollywood studios, unless they enter co-production or co-financing partnerships with Vivendi on premium TV dramas or movies.

Revenues at Studiocanal, Europe’s biggest movie investor, increased 6% in 2015 to €563 million ($625 million), notably thanks to the success of the David Heyman-produced “Paddington” and “Shaun the Sheep,” made with Aardman; “Imitation Game,” which Studiocanal distributed; and the performance of “Legend,” produced by Working Title with Studiocanal financing, at Studiocanal’s high-flying U.K. operation.

Adam Crozier at ITV turned around the U.K. broadcaster’s fortunes through robust acquisitions. Just how Bolloré could give Vivendi new momentum makes for a fascinating narrative. The conference call had enticing hints – advanced discussions with Telefonica to launch mobile-first video services across Latin America this fall, for instance — in what looks like a game-plan to reach out to European peers to co-produce and distribute high-end TV shows and services. But the presentation was short on detail. And the devil is in the details.

Vivendi, whose full-year results were broadly in line with expectations — total revenues of €10.8 billion ($12.0 billion), up 1.4%; operational profits of €1.1 billion ($1.2 billion), giving it a 10% profit margin – did make two announcements Thursday.

Firstly, Vivendi-owned Canal Plus Group, Europe’s second-biggest pay TV operator, has entered negotiations for a five-year exclusive distribution of Al Jazeera sports channels beIN Sports on Canal Plus in France. Vivendi itself has launched a public tender for GameLoft, the Paris-based mobile game maker that’s No. 2 in the world in terms of downloads, in which Vivendi has built a 30% stake.

Both moves come as Vivendi broke out financials at six Canal Plus channels in France for the first time, revealing escalating losses since 2012 culminating in €264 million ($293 million) in red ink last year, in what looks like a play for the beIN Sports deal to pass muster with French antitrust authorities.

BeIN Sports snagged rights to key French soccer matches in 2012, since which Canal Plus France subs and revenue have deteriorated, as Vivendi was at pains to point out on Thursday. Deal still has to clear France’s antitrust authorities, which is no given, however.

“The Canal Plus Group-beIN Sports agreement makes sense. There is more competition in France, with Numericable taking rights to English Premier League soccer matches,” said François Godard at Enders Analysis.

“Otherwise, the situation at Canal Plus in France certainly looks very preoccupying.”

Restructuring Canal Plus in France, via content investment and improving the customer experience, Vivendi reckons it will reach breakeven in 2018. “Unfortunately, however, it has not given much detail on investment in content and set-top boxes,” Godard added.