Watchdog relaxes Canal+ rights restraints
June 23, 2017
By Colin Mann and Chris Forrester
France’s Autorité de la concurrence (Competition Authority) has relaxed certain obligations imposed on the Canal+ Group which will allow it to distribute a ‘premium’ channel such as beIN Sports, exclusively in its bundles. The Authority also lifted existing restrictions on the purchase of rights to American films, while maintaining the constraints imposed on Canal+ for the retransmission of French films. The restrictions were variously imposed following its merger with TPS in 2006 and the acquisition of Direct 8 and Direct Star in 2011
Canal+ said it noted the Authority’s decision to relax its restrictions, suggesting that it reflected a partial recognition of past and future upheavals in the free and pay-TV markets, marked by the rapid emergence of powerful competitors, particularly active in the acquisition of audiovisual content.
Deutsche Bank’s media analysts published, in a note to clients, a summary of the changes, reports Chris Forrester. They are:
- C+ is now allowed to distribute, and even acquire, thematic channels with premium content on an exclusive basis. This was previously prohibited and ended in the blocking of the Canal-BeIN Sports deal. The similar restriction on C+ exclusivity on Canal+ Cinema, which needed to be supplied to all other distributors, is also being removed. Note: this does not cover premium sports which are still must-supply.
- From end 2019, C+ is no longer obliged to preserve the independence of OCS (Orange Cinema Series). OCS has recently signed with HBO for exclusive content. This could potentially see a merger of the OCS service with C+ as part of a deeper wholesale deal which has been reported in the French press.
- C+ can keep more content exclusive on its on-demand service, CanalPlay, incl its own movies, which it previously had to offer to all other parties. This enhances the appeal of CanalPlay versus Netflix, which previously had full access to all C+ French-language movies. From 2019, it will no longer be required to offer all ISPs access to CanalPlay, again providing potential basis for deeper wholesale deals.
- C+ can now strike output deals of >3yrs with the US movie studios & across pay-TV & free-to-air broadcast. From end ‘19, it will also be able to do so for French producers. Currently, it has to negotiate movie-by movie & separately for free & pay.
Laurie Davison, media analyst at Deutsche Bank, in his comments on the changes, said the granting of exclusivity over third party premium channels (possibly Disney, Discovery, or HBO from 2019), a stronger CanalPlay service and potentially broader US content deals should benefit churn and additional subs.
“Every 1% of [reduced] churn is worth €50m to EBITA. We have incorporated a decline in churn from 15% in ’16 to 13% by 2019, worth 3-5% to the market’s consensus Vivendi earnings. While discussions with Vivendi suggest no resumption of the beIN deal is imminent, we note there is now scope for this deal in the medium term, or a joint bidding strategy for the next Ligue 1 rights round. We have estimated a resumption of the C+- beIN deal, allowing C+ to exclusively sell beIN channels, could be worth €60m to EBITA by 2020E; 6% of C+ EBITA and 2% of Group revenues. The ability to offer more content exclusively & CanalPlay to key telco partners boosts prospects for deeper wholesale deals. Press reports of a deeper deal with Orange have suggested €150m-€200m pa in payments; which would be worth 11-15% to consensus Vivendi’s earnings.