Media Moguls Play Cat and Mouse Over Europe's Pay-TV Future
26 April 2017 - 10:59AM
Dow Jones News
By Nick Kostov and Manuela Mesco
Two of Europe's richest men want to remake the continent's
turmoil-wracked media business. First, they have to patch up their
tattered personal and business relationship.
In January 2016, Silvio Berlusconi, the TV mogul and flamboyant
former Italian prime minister, sat down for lunch with a longtime
friend and business partner -- Frenchman Vincent Bolloré, whose
media conglomerate Vivendi SA spans music, TV and videogames. The
lunch, at Vivendi's Paris headquarters overlooking the Arc de
Triomphe, eventually blossomed into a bold, joint ambition: to
create the Netflix of Europe by stitching together local content
and distribution across the continent.
"We talked about where the world is going," said another person
at the lunch. "The industrial desire to get married, to work
together was on the table," this person said.
More than a year later, those efforts have unraveled into
bitterness, pitting Mr. Bolloré's Vivendi against Mr. Berlusconi's
Mediaset SpA in one of Europe's biggest recent corporate standoffs.
Over the summer, as Mr. Berlusconi was recovering from open-heart
surgery, Vivendi backed out of a deal to buy Mediaset's premium
pay-TV, publicly questioning its performance.
Mediaset sued. Then in December, Vivendi started accumulating
Mediaset shares on the open market, eventually spending 1.26
billion euros ($1.35 billion) for an almost 30% stake. Mediaset
accused it of orchestrating a hostile takeover.
Both sides still want a friendly deal, according to people
familiar with each camp. People familiar with Mr. Bolloré's
thinking say he is counting on his large stake in Mediaset to force
Mr. Berlusconi to the table.
"There are many reasons why it's a win-win situation for both
companies to resolve this conflict," said Vivendi Chief Executive
Arnaud de Puyfontaine.
People familiar with the view of Mr. Berlusconi and Fininvest
SpA, the family holding company that controls Mediaset with a 40%
stake, said he isn't rolling over and wants Mr. Bolloré to return
to the original pay-TV deal.
Italian regulators strengthened Mr. Berlusconi's hand earlier
this month, ruling Vivendi must sell either its Mediaset shares or
its 24% stake in Telecom Italia SpA, the telecom carrier that many
executives see as more important to Mr. Bolloré's pan-European
media ambitions. Vivendi said it will appeal.
A détente could reshape Europe's media landscape, where
insurgent competitors are elbowing in on the turf of established
players. Cooperation between Messrs. Bolloré and Berlusconi would
consolidate their positions with a collection of content and
distribution assets across Europe.
When the two companies were getting along, executives on both
sides touted the idea of building a rival to Netflix Inc., the U.S.
streaming service that is expanding rapidly across Europe. A
particular strength of a Vivendi-Mediaset tie-up would be
local-language content, which is currently in short supply at
Netflix.
Other competitors, meanwhile, are roiling the industry. Rupert
Murdoch's 21st Century Fox Inc. is seeking regulatory approval for
a $15 billion deal to buy the 61% of British pay-TV giant Sky PLC
it doesn't already own. That move would further bolster those two
companies' content and reach across Europe. Mr. Murdoch and his
family are major shareholders of both 21st Century Fox and News
Corp, the owner of The Wall Street Journal.
Mr. Bolloré, 65 years old, has made a fortune by swooping in and
seizing control of businesses -- sometimes in quick takeovers,
other times through slow, steady stake-building. In less than two
years, he built a 5% stake in Vivendi into a 20% controlling
interest.
Under Mr. Bolloré, Vivendi targeted assets to marry with its
existing core media businesses including Universal Music Group and
French pay-TV company Canal Plus. Last year, he orchestrated a
hostile takeover of mobile-game developer Gameloft SE.
He has also built up a roughly 25% stake in Ubisoft
Entertainment SE, the maker of the Assassin's Creed videogame
series. Ubisoft Chief Executive Yves Guillemot recounts that two
hours after a friendly call with Mr. Bolloré, Vivendi surprised him
by announcing it had bought up 6% of the company.
"It was a really bad start," Mr. Guillemot said. Vivendi wants
board representation but has been rebuffed by Mr. Guillemot.
In September, Mr. Bolloré sent an email to Mr. Berlusconi on his
80th birthday, wishing him a speedy recovery from his heart
surgery, according to a person familiar with the matter. Mr.
Berlusconi responded almost immediately. He thanked him, saying
"'let's hope we can finally work together." Since then, though, the
companies have had virtually no contact, people familiar with the
situation say.
--Stu Woo contributed to this article.
(END) Dow Jones Newswires
April 26, 2017 05:44 ET (09:44 GMT)
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