Vivendi Loses Out on French Soccer TV Rights After 34 Years

(Bloomberg) -- Vivendi SA’s pay-television channel lost its three-decade hold on the broadcasting rights to French soccer, a major upset for the media company as a Chinese-backed competitor and other newcomers bid up prices by 60 percent.

Mediapro, a Spanish TV and film producer, won the rights to three of the main live packages for four seasons starting in mid-2020 and will create a sports channel to show the matches, the League of Professional Football said late Tuesday. Vivendi shares fell the most in more than three months.

Qatari-owned Al Jazeera spinoff BeIN Sports will get another top live package and Iliad SA’s Free won near-live highlights, the league said. Vivendi’s Canal+, which has shown matches since 1984 and now holds the bulk of the rights, didn’t win anything, while two packages weren’t awarded. The proceeds from the auction rose by 60 percent from the last sale, to 1.15 billion euros ($1.33 billion) a year, it said.

The victory for closely held Mediapro, controlled by Chinese fund Orient Hontai Capital, solidifies its might in European sports broadcasting, though it also drew suggestions that its bid was reckless. It’s a blow to Canal+, which relied on showing soccer matches to hold onto subscribers. The windfall for the league is a surprise, given analyst predictions that the auction would fail to attract high enough bids and be postponed.

“This opens a risky period of uncertainty for Vivendi’s pay-TV platform in France,” HSBC Holdings Plc analysts Olivier Moral and Christopher Johnen said in a note to clients. “The clear winner is the French professional soccer league.”

Moral and Johnen see two scenarios for Canal+: one where the company sublicenses the rights -- which will be priced expensively -- letting it keep a reduced number of matches, and one where the broadcaster tries to survive without French soccer, where the subscriber base likely faces further erosion.

‘Strategic Defeat’

Without a a sub-license deal, Canal+ will lose the right to offer viewers games featuring popular teams including Paris Saint-Germain and Olympique de Marseille. BeIN Sports has split Ligue 1 rights with Canal+ since 2012.

It’s “one more strategic defeat” for Vivendi after Vincent Bollore’s French media conglomerate lost control of Telecom Italia SpA’s board to activist Elliott Management Corp., said Francois Godard, an analyst at Enders Analysis.

“Canal+ will see its position as the gateway to all the best content on TV downgraded to that of one supplier amongst others,” Godard said in an email. He said Mediapro’s bid was “completely irrational” and that the company won’t be able to recoup its investment. “To me, this auction is another instance of football being clever enough to trap a new ingenuous rich investor -- after the telecoms, the Qataris, now come the Chinese.”

Vivendi shares slid 3.4 percent to 21.49 euros at 9:47 a.m. in Paris, giving the company a market value of 27.9 billion euros.

While recent rights auctions in England and Italy have dipped in value, the sport has still benefited from steep inflation over the past decade as telecom carriers including BT Group Plc started competing with broadcasters for content that could help them retain broadband subscribers. New interest from web giants including Inc. has raised some expectations that rights values will keep soaring.

“Now we have TV rights to major leagues in Spain and France,” Jaume Roures, chairman of Mediapro, said in a phone interview. “It’s a great success and we have a strong business plan.”

Barcelona-based Mediapro also had won rights to Italy’s Serie A this year, but Sky Plc’s local unit has sought to regain the contract after Mediapro’s talks with the Italian league hit a snag over financial guarantees. Mediapro can be successful in Italy, Roures said in the interview.

Canal+ Chairman and Chief Executive Officer Maxime Saada said the company escaped overpaying for sports rights. Talks are possible about a sub-license deal, he said on a call with reporters.

“For us, it’s not possible and reasonable to pay amounts that we know subscribers won’t be ready to support,” Saada said. Mediapro “doesn’t know the value of these rights in France.”

©2018 Bloomberg L.P.