Canal+ CEO Touts “Super-Aggregator Strategy,” Says “Overspending Kills”

Canal+, the pay-TV business of French media and telecom conglomerate Vivendi, on Monday shared its core beliefs and business strategies ahead of its planned split from Vivendi into a separate stock listed in London. Among them are a belief in the power of the Paddington franchise, its “super-aggregation strategy,” which CEO Maxime Saada compared to judo, and cost and spending discipline.

”I have seen competition come and go. The one common thread to all of these competitors: overspending,” Saada told the firm’s capital markets day in London, which was live streamed. “I believe you live or die at the moment you sign the check. On content, on technology, on M&A, overspending is what kills companies in our business. At Canal+, we do not believe in what some would call ‘strategic spending that does not have a clear positive impact on P&L (profit and loss statements).”

That was one of eight core beliefs the CEO highlighted on Monday. “Pay-TV is an attractive and growing market,” is another. “We have deliberately expanded Canal+ to 52 countries on three continents,” Saada emphasized. “The one thing that these markets have in common: all of them are growing – for different reasons … but all of them are growing.”

A third core focus is a diverse content slate. “Our multi-content value proposition is unique, and it is a winning approach for two reasons,” the CEO explained. “One, offering cinema, series, sports documentaries, kids programs, combining local and global content and mixing third-party and in-house content allows us to satisfy each and every member of the household and maximize satisfaction, average revenue per user (ARPU) and loyalty. Two, this diversified multi-content approach enables us to reduce our dependency on any given type of piece of content.” He cited the examples of the COVID pandemic, when sports weren’t available on TV, and the dual Hollywood strikes, when the firm was lacking U.S. originals as key examples.

Agility is yet another core Canal+ belief. Despite a presence in more than 50 countries and 27 million subscribers, the firm relies on fast decision-making, Saada said. “I believe speed is critical, and so is the ability to change course when required,” he said. One example is how the company approached the emergence of subscription video on-demand platforms. “When they emerged, we did not see a threat. We saw an opportunity, and we seized it,” the Canal+ CEO said. “Like in judo, we’ve used the strength of others to our advantage in our super-aggregation strategy.”

Another core strategy of the Canal+ team is that “controlling distribution is absolutely essential,” he noted. The same is true for the belief that “scale and a local approach complement each other.”

The final two strategic focuses are of a different sort. “Our seventh core belief is that as a media company, Canal+ has a specific responsibility that extends beyond financial performance to include our impact on the environment and society,” Saada told the event. ‘Finally, core belief number eight, we believe in Paddington.”

The famous bear from Peru then appeared on screen with some more information touting Canal+ after mentioning he was currently in his homeland, in which the upcoming third feature film, Paddington in Peru, is set.

Saada on Monday also mentioned Netflix several times. Over a decade ago, when he ran marketing, pay-TV penetration in France was stable at around 30 percent. “The reality was, we hit a wall,” he recalled. “We simply did not prove our ability to grow the market. Our growth potential was totally constrained. Then, Netflix arrived with a new value proposition, low price, no commitment, and an impressive user experience, and was later joined by Amazon, Disney+, and others. As a result, these platforms convinced an entirely new spectrum of the population to do something they had never done before – pay for content.”

And he emphasized: “Pay-TV penetration in France jumped from 35 to 71 percent over the last eight years. SVOD platforms literally doubled the size of the market.”

Netflix and other streamers are being offered on Canal+ as third-party streaming platforms. “In 2016, I went to Los Gatos to meet with [Netflix boss] Reed Hastings,” Saada told the investor event, quipping: “Yes, I did go to Los Gatos.”

What did he say? “I argued that although we could be perceived as competitors, we were actually on the same side, encouraging people to pay for content,” the Canal+ boss recalled. “As a result, Canal+ was one of the first operators, and certainly the first incumbent, to carry Netflix on its platform. This was the first of many agreements we signed with streaming platforms. But these are not simple carriage agreements. They are true partnerships.”

Having those streaming partnerships in addition to free-to-air networks, basic pay-TV channels, and premium in-house channels differentiates Canal+. “This position is not replicable by other competitors,” concluded Saada.” Netflix will not carry Apple TV+ or Max or Paramount+. This is a key element of our positioning.”

The supervisory board of Vivendi, led by chairmanship Yannick Bolloré and CEO Arnaud de Puyfontaine, recently approved a plan for a split into four companies, with shareholders set to vote on it on Dec. 9. If approved, it will lead to the separation of Canal+, advertising powerhouse Havas and publishing firm Louis Hachette Group, which consists of the firm’s 66.53 percent stake in Lagardère and full ownership of Prisma Media, from Vivendi. Bolloré will serve as chairman at Canal+, with Saada remaining CEO.

Vivendi early on Monday had also said that Canal+ expects revenue growth for 2024 to be “broadly in line” with 2023. Revenue for 2025 will “grow organically but this growth will be negatively affected and slightly more than offset by the anticipated end of broadcasting of its French free to air channel C8, and the termination of sub-licensing contracts and of onerous third-party content contracts in France.”Over the medium term and assuming an unchanged asset mix, Canal+ expects its revenue to grow “moderately,” the firm added.

Meanwhile, also over the medium term, Canal+ expects adjusted its earnings before interest, tax, and amortization margin “to continue to improve moderately as a result of cost optimization, operating leverage, and the expected transition to profitability of newly integrated assets transferred from Vivendi,” the company said. Plus, cash flow from operations is for 2025 projected to return to a level similar to that of 2023 after a hit in 2024 “due to an exceptional concentration of payments following recent content contract renewals and signatures and potential non-recurring payments in respect of proposed tax adjustments.”

The Canal+ guidance came with one big caveat. If its proposed acquisition of control of African pay-TV giant MultiChoice does get completed, this “would significantly impact the financial profile of the group in the medium-term in Africa and overall, adding a revenue growth engine while providing potential significant cost synergies,” the company said.

Vivendi has said that its separation plan is designed “to fully unleash the development potential of Vivendi’s different activities,” adding: “The group has endured a very high conglomerate discount since the distribution and listing of Universal Music Group (UMG) in 2021.” The new stocks are set to start trading on Dec. 16.