Orange CEO Open to Selling Controlling Stake in Dailymotion

By Ruth Bender 

BARCELONA-- Orange SA is open to letting an outsider take control of Dailymotion as the French telecom operator revives its quest to expand the video streaming website.

"Keeping control of Dailymotion is not something I'm religious about," said Orange Chief Executive Stephane Richard in an interview on the sidelines of the Morgan Stanley TMT Conference in Barcelona. "What I want is to make sure we select the best future business project with a possible co-investor."

Orange is again talking with Microsoft Corp, which has in the past shown an interest in taking a minority stake in the video company, along with others, according to the executive.

Mr. Richard's comments mark a shift from Orange's previous stance of wanting to retain control of the online video site, that in France is seen as one of the rare examples of a French startup success.

Founded in 2005--around the same time as YouTube--Dailymotion is one of a handful of French startups, including music service Deezer and online-advertising company Criteo, that have managed to gain global scale and attract funding. Orange took control of it in early 2011.

The former French telecom monopoly has been looking for partners to help expand Dailymotion for over a year in a bid to create a stronger rival to Google Inc.'s YouTube but efforts ran have been complicated by political opposition in France. In early 2013, Orange came close selling a majority stake in Dailymotion to Yahoo Inc. to buy a majority stake but the deal fell apart after then-industry minister Arnaud Montebourg stepped in to oppose a takeover, later saying the U.S. tech firm might have "devoured" a French jewel. The French state owns a 27% stake in Orange.

The intervention spooked other potential suitors and left Orange looking to sell only minority stakes.

Since then, however, the political climate appears to have changed. France's deputy minister for digital affairs, Axelle Lemaire, told French radio earlier this month that she was open to finding new investors and that a new "Dailymotion affair" must be avoided by all means.

"Dailymotion is no longer considered a political symbol by the French government, which allows us to consider options in a more relaxed way," said Mr. Richard.

Mr. Richard said Microsoft, which could help distribute Dailymotion via its operating system, has been considering buying a stake of around 10%. A Microsoft spokeswoman declined to comment.

Vivendi SA's Canal Plus in the past has sought to buy a controlling stake, according to a person familiar with the matter, but ran into a roadblock.

The key question Orange is grappling with is what it wants Dailymotion's future to look like, which will determine the choice of a potential buyer or partner, according to the CEO. One option would be to develop the site as a free service and expand in other markets. Another route could be to develop it into a paid-for platform, which would call for tying up with a company that has content, Mr. Richard said. Orange hasn't decided which way the pendulum is swinging, he said.

Signaling that he wants to make sure Dailymotion keeps its French heritage even if it moves into the hands of a foreigner, Mr. Richard said he would make sure a buyer would commit to keeping the decision-making center and research and development in the country. Orange would likely stay a shareholder of Dailymotion to guarantee that happens, he said.

If Orange fails to find a suitable buyer, it could decide to take Dailymotion public, Mr. Richard said.

"There is a considerable gap with You Tube, so Dailymotion needs to develop fast."

Sam Schechner contributed to this article.

Write to Ruth Bender at [e-mail]

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