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Mediapro scores as Canal+ loses Ligue 1

Football is an unpredictable game, and the decision by the French professional football league (LFP) to award Ligue 1 rights to Spanish upstart Mediapro this week has certainly caused a stir, with local media pondering wither the move could mean disaster for struggling Canal+.

Mediapro secured the bulk of the rights to Ligue 1 football for the 2020-24 period, taking three of the total seven packages on offer, including three of the four top packages.

The Catalan-based broadcaster’s president Jaume Roures yesterday told journalists in Paris that he hoped that Canal+ will carry the channel Mediapro plans to launch in France for Ligue 1 and added that there is no reason for subscribers to abandon the platform. He said he planned to hold talks with all French operators and intimated that one possibility would be to come to some sort of reciprocal arrangement with Altice France/SFR, which holds the rights to Champions League football but which did not participate in the Ligue 1 auction.

Mediapro, which is majority owned by Chinese investment fund Orient Hontai Capital, with advertising group WPP holding a significant minority stake, has appeared of late to be on a mission to stake out a role as a major player in sports rights across southern Europe. The broadcaster, already the key player in top tier football broadcasting in Spain through its ownership of BeIN Sport Spain and hold on La Liga rights, attempted to break out of the Spanish market by taking the rights to Italy’s Serie A from under the nose of pay TV leader Sky earlier this year.

That deal however has come unstuck following a legal case launched by Sky that centred on whether the Spanish company was acting as an intermediary that would sell on its rights or a distributor in its own right.

The Italian league this week agreed to annul its award of Serie A rights to Mediapro and demanded that the broadcaster commit to a €1.2 billion guarantee to avoid a definitive cancellation.

At the Paris press conference, however, Roures said that the case in Italy is not yet closed, pointing out that the group has until June 7 to make a financial guarantee. He also indicated that Mediapro may look to seek to expand its portfolio of rights with other football leagues.

Following the initial announcement from the LFP, Canal+ CEO Maxime Saada was quick to express doubts about whether Mediapro will be able to recoup its investment – an spend that Saada believes does not make sense, even though Ligue 1 has long been considered underpriced relative to its European peers.

Saada indicated that he was interested in potentially helping Mediapro out by sub-licensing the rights – although that is not the same as simply carrying Mediapro’s channel. In a letter to employees on Wednesday – and ahead of Mediapro’s press conference yesterday ­­– he said that to “overpay for sports rights in the face of all economic logic is not a viable solution” but noted that the LFP auction “authorises, for the first time, the awardees to cede all or part of their rights, and thus opens the possibility for Canal+ to win them back indirectly”.

Whether the possibility of a shared football offering at some point will be enough to limit the damage to Canal+ remains to be seen. The pay TV operator has been under a lot of pressure over the last few years, bleeding subscribers in France the face of cheaper alternatives and the entry of rival players.

Canal+ has managed to offset its metropolitan losses to some extent by gaining wholesale customers through agreements with ISPs Orange, Free and Bouygues Telecom, as well as by growing its international base, particularly in Africa.

When parent company Vivendi posted its Q1 results earlier this month, chief financial officer Hervé Philippe said that the operator in France was “recovering with a good commercial trend and improving churn”. Whether Canal+ will be able to maintain that trajectory now is moot.

In his letter to employees, Saada said that “it is our responsibility, with the support of our shareholder, to put in place for Canal+ a model that is sustainable, in a market that is being fully disrupted, as independent as possible from this type of auction”.

Apart from sport, the other main pillar on which Canal+’s model has rested to date is movies and series. However, the arrival of Netflix has posed a threat on this front, along with the ever-present and growing threat of piracy. Canal+’s subscription video-on-demand service CanalPlay is already number two to Netflix in what is considered to be an underdeveloped SVOD market by the standards of comparable European countries.

While Netflix has made the greatest headway in France, Canal+ could also face an additional threat from Amazon Prime Video, which has yet to really start investing in original content for this market.

Canal+ has been a major force in original content creation in France and in film production in particular, leading to concerns that it may scale back its investment in the wake of the Ligue 1 debacle, which casts a shadow over the viability of the operator’s business model.

Saada is correct in pointing out that the market is being disrupted. Most of the focus on disruptors has been on OTT TV players such as Netflix.

Ironically, the disruptor in this case is a traditional broadcaster rather than an internet company.

However, Canal+, the pioneer of pay TV in Europe in the 1980s, is now in some danger of becoming a harbinger for the decline and possibly the fall of that model. It needs to act fast to reinvent itself.