Market Insight

Leading French network secures content production with controversial acquisition

December 21, 2015  | Subscribers Only

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Private national French television network TF1 has gained control of major production company Newen by acquiring a 70% majority stake in holding company, FLCP. The deal was finalised on 9 November 2015. TF1 aims to create a European production powerhouse with this partnership, enabling it to tap into foreign markets.

The acquisition has caused a stir in the French production sector, ultimately resulting in Newen being expelled from the 150-member independent producers association, Union Syndicale de la Production Audiovisuelle (USPA). It has also attracted the disapproval of rival networks France Télévisions and M6, which have made their opposition to the acquisition clear by withholding business from Newen. These reactions reflect the nature of the French production market, where companies are required by law to meet investment quotas in funding production of French-language content, and the importance of cinematography to the cultural life of the country. Critics claim that the deal contravenes an unwritten agreement among participants to work together for the benefit of the industry.

Nonetheless, whilst acknowledging the discontent, the French government has approved of the TF1-Newen deal, which it says is in line with its vision for making the French television industry competitive by global standards. France Télévisions, which has been working with the then independent Newen for the past 10 years, has since then acted to formalise its unofficial partnerships with other independent studios, by signing agreements to protect its rights.

Our analysis

TF1 is the leading network by viewership in France with 21.2% share of the audience, according to Médiamétrie. The network is a subsidiary of TF1 Group, which is in turn owned by Bouygues. The acquisition target Newen is a producer of television content, being behind some of the most popular shows and series in France, including hit soap opera Plus belle la vie and high-profile upcoming show Versailles.

The acquisition comes as major participants in the video media industry around the globe are increasingly competing for the best television content. This trend has become more prevalent in the recent past, reflecting the international expansion of US online video behemoths Netflix and Amazon. Although France's unique cultural environment means the shift in viewing patterns away from linear television consumption is less apparent, the change is still taking place. According to IHS data, the audience for pay TV and free TV, which account for most of TF1’s viewership, grew by just 3.4% and 0.9% respectively in 2015. Meanwhile, although Amazon has not yet made its entrance into France, Netflix launched there in September 2014 and, according to IHS research, has already signed up 768,000 subscribers, up 108% in 2015 with growth of 67% expected in 2016.

Netflix’s popularity can be partially attributed to its vast library of content, which includes both French and foreign titles. As in other markets, Netflix is actively expanding this library through its ever growing investment in original content. In fact, in what seems like a landmark achievement, IHS research indicates that Netflix surpassed the BBC in terms of worldwide expenditure on content in 2015. Netflix’s original content has become one of its key selling points, and its rivals are realising they have to compete with productions of their own.

This acquisition will help TF1 increase the share of its in-house productions, thus guaranteeing exclusive rights to content for the network. Newen's history of producing highly successful television content gives the broadcaster a competitive advantage in the French market, where local content plays a critical role in the battle for viewership. TF1 also aims to produce content for foreign markets, which may bring lucrative returns as the bidding for top television content intensifies.                                                                  

This development, and the Government's approval of the deal, may prove to be a decisive moment in the evolution of the traditionally-protective visual media environment in France. The arrival of Netflix could prove to be the catalyst that brings about the end of an era for the French video industry.

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