Market Insight

Vivendi and Mediaset form pan-European pay TV, streaming alliance

April 11, 2016  | Subscribers Only

Tim Westcott Tim Westcott Director, Research and Analysis, Programming

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France's Vivendi and Italy's Mediaset have unveiled a strategic alliance designed to create a southern European media powerhouse encompassing content creation, on demand streaming platforms and pay TV. According to a joint statement released on Friday, the two groups will combine leadership of their respective national markets by 'leveraging the production strengths and cultural affinities of Italy, Spain and France'. 

The two partners will exchange 3.5% equity stakes, structured in a way to take their differing market capitalisations into account, Vivendi will take control of the Italian company's Mediaset Premium platform, acquiring 89% from Mediaset and the remaining 11% from Telefonica. The agreement includes a 'lock up' clause, which will prevent Vivendi from acquiring more than 5% of Mediaset for the next three years. 

This alliance aims to reach three goals in the near future: creating 'a new European major player for content creation' producing new film and TV programming for the international market building on the partners' TV networks in France, Italy and Spain; creating a new pan-European on-demand streaming content platform from their existing operations in Italy, France, Spain and Germany; and finally, integrating Mediaset Premium into Vivendi's pay TV operations in France, Poland, Vietnam, Africa and French-speaking overseas territories. 

Our analysis

Through its Canal Plus division, Vivendi owns StudioCanal, one of the few European content companies built along similar lines to a US studio. As well as producing movies, StudioCanal has distribution operations in France, Germany, the UK and Australia, while Mediaset's subsidiary Medusa is one of the leading film companies in Italy. StudioCanal was high profile at the Mip TV market in Cannes earlier this month, announcing the further expansion of its international network of TV companies and a bold move to produce 'mobile-first' drama series. The company's statement referred to new content being distribution through their TV channels, which include the Canal Plus pay and free-to-air channels in France, and Mediaset's predominantly free TV channels in Italy and Spain. However, content produced 'for the global market' is likely in practice to mean English-language programming, in which StudioCanal is already active.

The talks between Vivendi and Mediaset have been widely reported for weeks, the French press in particular reporting the alliance as an anti-Netflix move. The US streaming platform has provoked widespread angst in France because, being based in Luxembourg, it is not subject to local content requirements. A new European subscription video-on-demand (SVoD) over-the-top service, likely to be launched in September, will pool the resources of Mediaset's Infinity, Vivendi's German SVoD service Watchever, and France's CanalPlay. With the acquisition of Mediaset Premium, Vivendi has also taken control of Infinity. Mediaset said that the subscription service, launched in 2014, had 600,000 customers at the end of last year. 

Vivendi's acquisition of Mediaset Premium marks its return to the Italian pay TV market. Canal Plus was the first pay TV operator in Italy with the Tele piu service, but pulled out of the market in 2003. Mediaset has made no secret of its desire to sell all or part of Mediaset Premium, which is one of the few European digital terrestrial pay TV services but which has struggled to sustain a challenge to the market-leading Sky Italia. An investment in exclusive rights to the Champions League from this season has led to an increase in subscribers, revenues and ARPU. Mediaset Premium had 2.010 million subscribers at the end of 2015, up from 1.815 million on 30 September.

While Vivendi and Mediaset's SVoD alliance will compete directly with Netflix, IHS Technology believes that Sky is just as much in the partners' sights as the US SVoD giant. Following the takeover of its German and Italian affiliates, Sky is increasingly focusing on growth by developing over-the-top services and ramping up its investment in original content. This is a very similar strategy - with the difference that Sky is not active in feature film production. Furthermore, if Sky does look into launching services outside its core markets, it is likely to do so with over-the-top services, which will enable it to amortise its investments in technology and original production. 

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