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Market Insight

Vivendi in the running for Dailymotion

January 27, 2015  | Subscribers Only

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French media group Vivendi has bid to take control of online video site Dailymotion. The conglomerate, which owns pay TV operator Canal + and Universal Music Group, has offered current owner Orange €217m ($288m) for 80% of the company.

This is the last in a series of bids to acquire the platform from Orange. US online platform Yahoo! And Hong Kong firm PCCW Group previously submitted offers to buy Dailymotion. An offer which would keep Dailymotion’s ownership within France is likely to be favoured by regulators and government.

Vivendi’s offer is subject to government approval.

Our analysis

Vivendi’s French origins and interests make it an attractive buyer for Dailymotion in a way that previous suitors could not match. As a 24% shareholder in Orange, the French government has a stake in the sale of Dailymotion, and has previously blocked the two US and Chinese bids on grounds of keeping French business within the country. When government approval could be decisive, a French company is better placed to succeed.

Orange’s intention to sell some of its 100% stake in Dailymotion has been clear since the first – failed – takeover bid by Yahoo! in 2013. It is a question, however, whether Orange wanted to sell as much as 80%. At the time when the telco bought the remaining shares in Dailymotion in 2013, reference was made to its hope for a partner shareholder that could boost Dailymotion’s strong American business. Despite its roots in France, Dailymotion has more views from international than national audiences. Vivendi’s work in international over-the-top (OTT) video services such as German subscription video site Watchever and its stake in music Multi-Channel Network (MCN) Vevo make it suited to take on Dailymotion, but the size of the stake it wants to buy would mean less of a partnership and more of a takeover.

Orange, itself an important telecoms and pay TV player in France, made its first acquisition in Dailymotion at a moment of change and strategic development. In early 2011, it bought its first 49% of the online platform; in the same year, it rebranded and improved its IPTV offer, and the two holdings may have provided complementary technologies for a group expanding its products and reach. While Dailymotion continues to grow its user base, with 128m monthly unique visitors as of 2014, Orange may be able to sacrifice Dailymotion’s strategic uses for a sale which both raises money and develops international opportunities for Dailymotion.

Many broadcasters and producers have invested in short-form online content via the MCN space, such as Discovery with Revision3 and Disney with Maker Studios, and Endemol with its in-house Beyond. This, indeed, is also how Vivendi invests, owning part of music video network Vevo via Universal Music. But the multinational, if this deal passes regulators, will be almost unique in owning a video platform - a YouTube competitor.

There is however a significant drop-off between the two platforms. Dailymotion is a tenth of the size of YouTube by monthly unique views. Lower advertising rates are a challenge for all online short-form platforms – combined with a smaller scale, this could continue to prove a challenge to growth on a scale to rival YouTube. But with international OTT technologies and content expertise, having broadened out from pay TV and telecom services, Vivendi may be able to inject new momentum into Dailymotion.

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