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Orange Pay TV Unit Has Zest for Growth

When the French telecommunications giant Orange launched its Orange Cinema Series pay TV service a decade ago, it was perceived as an underdog by the French film and TV industry, since the local pay TV market was dominated by Canal Plus.

Some feared OCS would suffer the same fate as TPS, a pay TV operator dedicated to films and series that was shuttered after its merger with Canal Plus in 2007. But 10 years after its bow, OCS has managed to survive the Netflix tsunami, collaborate with its former rival Canal Plus, and ultimately thrive with its content and distribution strategy.

OCS has been able to expand its subscriber base to reach about 3 million thanks to its hyperdistribution strategy and hybrid model mixing linear and subscription VOD consumption, says Serge Laroye, the chairman of OCS and deputy executive VP of Orange Content.

Since 2013, OCS has been distributed on all platforms, not just through Orange but also on Canal Plus’ service SFR, among others, and has been self-distributing the service via OTT. That strategy has paid off — OCS gained 100,000 subscribers in the last year, Laroye says.

OCS’ hybrid model has worked well, allowing the company to reach different demographic groups, including millennials who are watching linear TV less and less. About 40% of the audience watches OCS on both linear and subscription VOD, while 30% turn up only on the linear service and 30% only on the SVOD service, according to Boris Duchesnay, VP of programming at OCS.

The company’s content investment on the film and TV drama fronts has been another crucial element to boost subscriptions.

“When we noticed the skyrocketing prices of sports rights, we decided to ramp up our input in series and cinema,” says Laroye, alluding to Patrick Drahi’s Altice Group, which splurged on soccer rights and has been plagued by financial problems. “Seeing how other players who banked on sports rights, such as Altice, are now struggling, it seems that we have made the right move.”

Under the leadership of Orange CEO Stéphane Richard, the company has aimed to become a player in the film and TV industry in France. “We can’t be only distributors or an aggregator, we must be capable to create, curate and editorialize content,” Laroye says.

This strategy has led OCS recently to renew its agreement with local film guilds to invest €125 million ($142 million) in French films in the next three years.

Meanwhile, OCS and Orange’s film division Orange Studio has also committed to jointly invest $114 million over the next five years in original series, the first of which is the anticipated “The Name of the Rose” with John Turturro and Rupert Everett.

The alliance between OCS and Orange Studio allows both banners “to create a synergy and combine resources to be more competitive for acquisitions and strike multi-territory deals,” says Guillaume Jouhet, CEO of OCS.

“Today, we are well-established in four big territories, including France and Spain, so we are able to make global deals. … That’s the only way we can avoid getting squeezed out of the market by rivals like Netflix,” Jouhet says.

On the TV side, OCS scored a big coup with its exclusive multi-year deal with HBO signed in 2017, before their previous deal with HBO signed in 2013 had even expired.

Jouhet says the deal with HBO marked a milestone for the group because it was not just an output deal as it had been initially the case when it was signed in 2013. “It’s a full exclusivity on SVOD rights for all of HBO’s content for a long period,” he says.

Aside from hugely popular U.S. imports like HBO’s “Game of Thrones,” OCS has also been keeping subscribers happy with original series, including comedydrama “Nu” and science-fiction series “Missions,” even if it has been working with a much smaller budget than Canal Plus. OCS’ budget for original series in 2018 was $6.82 million.

“We forged ties with producers for many years, giving them the freedom to experiment with original concepts for 30-minute series and having them work with tight budgets,” Duchesnay says. Going forward, the alliance with Orange Studio will allow OCS to work with bigger budgets on onehour formats.

OCS and Orange Studio have four original series in the works, notably “The Name of the Rose,” which will be showing day and date with Italian broadcaster RAI.

Cinema is another focus of investment for OCS and Orange Studio. Under their partnership, they will also be able to join forces on four or five movies a year. “French cinema is still key to sustain and drive up subscriptions as well as ratings on OCS,” Duchesnay says.

“OCS’ deal with the French film group UGC has given OCS access to mainstream French movies,” says Jouhet, citing UGC’s “Serial (Bad) Weddings,” the smash hit comedy, which grossed more than $148 million worldwide and was a ratings success on OCS.

And while Canal Plus has been reducing its acquisitions of French films due to its declining annual revenues, OCS has been picking up popular films, which garnered strong ratings, notably Luc Besson’s “Valerian” and Dany Boon’s “La Ch’tite Famille.”

“We’re in a competitive environment where series have become very important, but having an offer of fresh films, both local and international ones, is also crucial for TV audiences and subscribers,” says Orange Studio’s David Kessler, who notes that France’s big TV channels, such as TF1 and M6, have their own in-house film divisions because they believe in the profitability of films.

Aside from such commercial films as “Valerian,” Orange Studio has been investing in politically or socially minded prestige movies such as “Timbuktu,” “Girls of the Sun” and Cannes Film Festival player “Les Chatouilles,” which are boosting Orange’s brand.

Laroye says the banner has been positioning itself at an earlier stage on projects to have an artistic input as well as keeping the rights to content it invests in.

Laroye is keeping a close eye on any potential impact of the launch of well-funded streaming services from major players like Disney, Warner and Apple. But he says OTT players will have to overcome several barriers specific to France in order to break into the market.

“Besides France’s strict window-release schedule, SVOD services that launch will face another challenge in France, which is the access to set-top boxes, because French households still consume content mostly via set-top boxes and will continue doing so for another five to 10 years,” Laroye says. “These new SVOD services will need to reach deals with local telecom operators to be distributed and that will be difficult.”

He adds that Amazon is not a rival, as Netflix is, but rather a potential partner. The company is in discussions to have OCS distributed on Amazon Channels once it launches in France.

Laroye says OCS aims at reaching break-even within five years. “We’ve chosen to adopt a long-term strategy and invest in content,” he says. “In terms of international development, OCS has a localized approach in select markets, like Slovakia, Poland, Romania, etc., and has a global approach in Africa.”

For Francois Godard at Enders Analysis, the future growth of OCS will depend on whether Orange can keep its position as France’s biggest telecom group.

“Orange may not be the only telco distributing OCS, but it’s the biggest one, with about 7 million subscribers. And for Orange, the best way to expand its subscriber base will be to strike deals with global players like Disney and Amazon Prime,” Godard says.

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