Vivendi Close to Acquiring Mediaset's Pay TV Business -- Update
April 08 2016 - 08:32AM
Dow Jones News
By Nick Kostov
PARIS--French media firm Vivendi SA is close to acquiring the
pay TV business of Italy's Mediaset SpA, according to people
familiar with the matter, moving to snap up more assets to create a
European rival to U.S. streaming video giant Netflix Inc.
Under the terms of the deal under discussion, Vivendi and
Mediaset will swap a 3.5% stake and take seats on each other's
boards, the people said. Since Vivendi's market value is roughly
six times more than Mediaset's, it will take control of the Italian
firm's loss-making pay TV unit, valued at around EUR900 million
($1.02 billion) by some analysts.
The alliance with Mediaset, which could be announced as soon as
Friday, is a key step in Vivendi Chairman Vincent Bolloré's project
to build a multilingual, pan-European group to challenge Netflix
and pan-European pay-TV giant Sky PLC. Vivendi is also working on a
new European streaming service, which could be launched as soon as
this fall, the people said.
"To face up to Netflix we're going to have to do something
similar," said one person familiar with Vivendi's thinking.
"They're the main competitor forcing us to transform and
evolve."
Vivendi also has its sights on the U.S. market, said one of the
people familiar with the matter.
Subscription-video-on-demand services such as Netflix and Amazon
Inc.'s Prime have sent traditional broadcasters scrambling, as they
gain millions of customers each year and produce a growing library
of their own content.
Netflix launched in Italy, Spain and Portugal last October. In
January, it said it was expanding its Internet TV network to
another 130 countries around the world.
But European viewers, most of whom aren't fluent in English and
are accustomed to watching programs in their local language, pose a
challenge for the Los Gatos, California-based firm. Netflix, which
has a well-stocked library of movies and TV in the U.S., has a
limited offering in its European countries where the rights have
often already been sold to other distributors.
Vivendi is betting that it can copy Netflix's streaming service
in Europe by simultaneously buying rights in several territories.
Traditionally, studios have sold the rights for TV shows
individually by country.
Vivendi is also buying some independent studios, underscoring
its belief that local content in countries like France, Spain and
Italy would appeal to large audiences in places like Africa and
Latin America where they speak the same language. This week, it
bought minority stakes in Sunny March TV, an independent company
co-founded by British actor Benedict Cumberbatch, and Spain's Bambu
Produciones.
"If we want to be serious we have to invest in original local
content--that's what makes the difference," said Dominique Delport,
president of Vivendi Content.
To be sure, several streaming competitors to Netflix have
emerged as it has embarked on a global expansion and haven't yet
dented its growth. In the last quarter, Netflix added 4 million
international customers, ending with a total of 75 million
subscribers.
Moreover, as the largest global subscription streaming business,
Netflix has a bigger budget for content acquisition than local
competitors. While much of its original content spending has been
focused on premium English-language, it has also been investing in
local language series such as the coming political drama
'Marseille,' its first French original production.
Mr. Bolloré has been leading a push for Vivendi to transform
itself since taking the helm of the once sprawling conglomerate in
2014.
In recent months, he has shaken up its French pay TV unit Canal
Plus and put a multibillion-dollar cash chest to work, buying large
stakes in Telecom Italia SpA and two French videogame companies,
Ubisoft SA and Gameloft SE.
Vivendi's share price has dropped more than 20% over the last 12
months as shareholders complained of a lack of clarity on the
company's strategic direction. In its latest annual report, Vivendi
said it still had a EUR6.4 billion cash pile.
"The Mediaset Premium acquisition would be the first stage in
Vivendi's project to create a global media group with Latin roots,"
said Jerome Bodin, an analyst at Natixis. "They're trying to create
a cultural group that's sufficiently large and homogenous to exist
on the global stage."
Shalini Ramachandran contributed to this article
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
April 08, 2016 08:17 ET (12:17 GMT)
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