Market Insight

France signs off on theatrical windowing cut in 2019

January 08, 2019  | Subscribers Only

Max Signorelli Max Signorelli Research Analyst, Media & Entertainment

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New regulation signed off by the French Ministry of Culture has significantly reduced the windowing of movie titles following their theatrical release. The likes of Canal Plus will be able to show films on their pay TV services as early as six months after release in theatres, a reduction of four months from previous regulation.

The pay TV window is not the only one set to change as physical and digital transactional windows are also set to be reduced with the additional benefit of no longer being interrupted by pay TV airing. Furthermore, OTT subscription video services such as Netflix and Amazon Prime Video may also see their window shrink from the current 36-month period to just 15-17 months dependant on their investment in local film production.

Our analysis

This regulation update follows a long history of discussion and proposals between French operators and government to modernise France’s windowing regulations which, until now, have been the most stringent in Europe. This is a significant change that seeks to reward investors’ contributions to the French film industry, while also helping to tackle piracy.

As one of the largest investors in local content out of any European broadcaster, Canal Plus is set to benefit greatly from these changes after some challenging times for its online video business lines, including the fall and reformatting of its own subscription video service Canal Play. Canal Plus’s pay TV business, its Canal VOD transactional OTT service, and its Canal subscription video packages are all set to benefit from windowing alteration as all of them will offer movies soon after theatrical release and for longer period. The price to Canal Plus will be its continued significant investment in French content, which is proposed to be as high as €180 million (~$205 million) per year until 2023.

Despite these windowing reductions also benefiting the ever-diminishing physical video market, IHS Markit believes that the alterations for digital and TV formats are much more significant, overwhelming any potential gains by the physical market and serving to accelerate the rate of physical video’s decline.

These windowing changes also present an opportunity for foreign global players in the online video market in France. Given the significance of the potential halving of the OTT subscription video window, players such as Netflix and Amazon may not be able to sit idly by while Canal Plus and other local contributors gain access to movies sooner, effectively forcing their investment in French content.

That said, under new law, the likes of Netflix and even advertising-funded video sharing platforms such as YouTube have already begun contributing 2% of their French-generated revenues to the Centre national du cinéma et de l’image animée (CNC), France’s National Film Fund. As a result, some of these video platforms may already be in a position to benefit from a windowing reduction, despite their contributions falling far short of Canal (2% revenue contributions for international players vs ~12.5% for Canal Plus). All of this is on top of impending EU legislation imposing a 30% European content quota for international video services operating in Europe.

For now, Netflix maintains an overwhelming lead in France over its competitors with a forecast 60% OTT subscriber market share in 2018 (excluding multiscreen services). IHS Markit does not expect these windowing changes to fully revitalise Canal’s position in the French market but rather to marginally reward it for its contributions over the years. Meanwhile, depending on the criteria of investment required to reduce windowing, French cinema in general may see a funding boost as video providers secure their spot in the movie release timeline.

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