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Canal+ Group is in advanced discussions to acquire the film, television, and pay-TV divisions of Orange, the leading French telco group.

Canal+ Group, whose parent company is Vivendi, already owns 33.3% of OCS, the pay-TV arm of Orange, and has been distributing the service on its platform as part of its cable bundle since 2011. Canal+ and Orange could enter into exclusive negotiations as early as September and would then be subjected to anti-trust approval, according to a pair of senior industry sources. Closing that pact could take another year.

The deal currently being discussed would also include the acquisition of Orange Studio, the content division in charge of co-producing, selling abroad and distributing select films in France. Recent movies released locally by Orange Studio include Florian Zeller’s “The Father.” The banner also has French rights to Zeller’s follow up “The Son.”

OCS, meanwhile, has been investing big bucks in premium content to recruit subscribers since launching in 2008, notably with its multi-year deal with HBO, but the banner has struggled to become financially viable. OCS has been weakened by the successive launches of competitive offers from rival SVOD services in France. On top of that, OCS’s exclusive multi-year deal with HBO, which was its biggest asset to lure new subs, is coming to an end in early 2023. Although Warner Bros. Discovery is now looking to delay the roll out of its combined HBO-Discovery+ service in France beyond 2023, OCS isn’t in a position to renegotiate another type of exclusive deal.

Canal+, however, would have enough leverage to strike an exclusive distribution deal with this new HBO-Discovery+ service to aggregate it as part of its cable bundle in a pact similar to the one it signed with Disney + in France, according to Francois Godard at Enders Analysis. Godard also predicts such deal would have strong chances of being approved by the anti-trust board.

In 2011, the anti-trust board blocked Canal+ Group’s attempt to merge with OCS and launch a premium pay TV channel, but Godard says “the world has changed and Canal+ is no longer dominating the French market.” “Watchdog authorities are aware that Canal+ must consolidate to face off global streamers like Disney which are spend €30 billion in content this year,” Godard continued. “Canal+’s strategy today is to increase their scale, they’re on a world market and they need to ramp up their worth and subscriber base to finance bigger productions,” the analyst continued.

As a pay TV service, OCS has to invest in local and European films, like Canal+, and benefits from an exclusive window set at six months after their theatrical release — way before global streamers like Netflix and Amazon which have a 15-month window. OCS signed last February a three-year pact with film orgs to invest at least €60 million on French and European film in the three years. But it’s uncertain OCS would continue operating as it does today under these obligations if it became fully owned by Canal+ Group. For French producers looking to finance their movies, that could mean one less source of pre-financing to tap into. “Canal+ is known for digesting its rivals — it did it with TPS, a pay TV group which merged with Canal+ in 2007 and was dead by 2012 — and OCS’s fate could be identical,” said a source close to Orange.

Earlier this year, Vivendi was in discussions with Lionsgate to take a stake in Starz, but its unclear where those talks stand at this point. “Canal+ had two targets, Starz and OCS/Orange Studio, but (Vincent) Bolloré (Vivendi’s boss) is afraid of Hollywood, and OCS/Orange Studio represent an attractive asset for Canal+ Group because they have a fairly large library of films,” said an industry source. In addition, Canal+ already has a 33.3-percent stake in OCS and “isn’t willing to let another group step in and/or acquire the company,” said another source.

Vivendi is also on track to acquire a 57.35-percent stake in Lagardère, the French media, publishing and travel retail conglomerate. The French company is also a shareholder in Banijay, as well as FL Entertainment, the newly-listed banner comprising Banijay and the online gambling group Betclic.

Representatives of Canal+ and Orange declined to comment on this report.

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