Market Insight

CSA greenlights Canal Plus takeover of free-to-air channels

September 19, 2012

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit
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French pay TV group Canal Plus will move further into free to air TV this month having received clearance for its takeover of two digital terrestrial channels from broadcasting regulator the CSA. The decision from the CSA came a shortly after Vivendi, Canal Plus' main shareholder, got the go ahead to merge its pay TV activities in Poland with competitor Platform N.

The acquisition of the Direct 8 and Direct Star channels from the Bolloré group was agreed in September 2011, but has been reviewed first by France's competition body and then the CSA. Many of the conditions set by the regulators are aimed at ensuring that the pay TV group does not gain an unfair advantage over free-to-air competitors by leveraging its control of pay TV rights and its own content. For example, the CSA set limits on the number of first-run TV series from the Hollywood studios Direct 8 may transmit in access prime time, and the channel will only be able to air Canal Plus productions 18 months after their transmission on pay. Direct 8 will also have to devote 8.5 per cent of its annual revenues to original productions.

Canal Plus said it was 'delighted' with the CSA's green light and that the €465m deal - under which Bolloré will cede full control of the two channels in return for equity in Canal Plus - would be completed this month.

In Poland, competition regulator UOKiK gave its approval to two transactions between Vivendi and ITI Holdings: the merger of the Cyfra Plus (75 per cent owned by Canal Plus) and the n (controlled by TVN) platforms, and the acquisition by Canal Plus of a 40 per cent stake in the holding company of TVN, N-Vision. The regulator did not impose any conditions, taking the view that the Polish pay TV market would not 'experience significant restriction of competition'. Vivendi said the deal would be completed in December.

Up to now, Canal Plus' free-to-air operations were limited to the early evening segment of its flagship channel, programmed with popular chat shows and comedy. Its main focus is - and will remain - the pay TV market, but the decision to buy a 60 per cent stake in the Bolloré group's digital terrestrial channels reflects a long term lack of growth in pay, while advertising revenues in the free-to-air space have shown dramatic growth as digital terrestrial television (DTT) has become available throughout France (see our 2 March update, Canal Plus eyes profitable move into free TV). Major players TF1 and M6 are increasingly seeing much better returns from their DTT channels than their flagship channels. 

Direct8, targeting a young adult audience, and the music-themed Direct Star, account for a combined four per cent of the TV audience. This puts them some way behind the market leaders, TF1's TMC and the M6 Group's W9. In the first half of 2012, Direct8 was placed equal fifth in audience share terms with 2.1 per cent, behind TMC (3.6 per cent), W9 (3.1 per cent), NRJ (2.4 per cent) and France 4 (2.2 per cent) and level with NT1. With Canal Plus behind it, the channels (which will be rebranded as D8 and D30) may see some benefit, though the regulatory restrictions will limit the amount of benefit the group can gain from its access to US studio content, movies and sports rights.

To some extent, Canal Plus may even be at a slight disadvantage to TYF1 and M6, which have greater flexibility in producting and acquiring content for its flagship and DTT offerings, as well as a much larger share of the TV advertising market. Furthermore, the launch of six new high definition DTT channels in France at the end of the year will add to the competitive pressure in the TV advertisng market. IHS Screen Digest is forecasting a five per cent decline this year to €3.4bn, with multichannel edging ahead by just 1.5 per cent.

France Poland
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