VIEW FROM MIPTV: EUROPE, WE HAVE A PROBLEM

 

At the beginning of his keynote speech at this year’s MIPTV confab in Cannes, Vivendi content chief Dominique Delport observed that while SVOD accounts for 20% of viewing time in the US, it only accounts for 4.7% of total revenues – and only 2.3% in Europe.

He added that while cable is a $100bn business and TV ads bring in $70bn on an annual basis, SVOD is still only a $5bn business. “Two giants and a dwarf,” he quipped. Clearly, traditional media is still generating most of the revenue that pays for the sports and high-end drama that we watch on TV.

But then Delport turned to why Europe needs to worry about the new digital landscape. Out of the top 20 internet companies around the world, 11 are American and nine are from Asia. Not a single one is European.

“Cannes, we have a problem,” Delport also quipped.

He hit on one of the biggest issues facing European media companies in the digital era – their lack of access to data. By 2020, around 200 countries will have ended analogue broadcasts and every digital company will have become a broadcaster. Years before that watershed date, the internet has already consolidated around a handful of digital titans, all of which distribute content and collect massive amounts of data from their users.

“We spend 50% of our time with four usual suspects and they represent 1.5 trillion dollars in market cap,” said Delport, referring to what he called ‘GAFA’ [Google, Amazon, Facebook and Apple]. In Asia, he referenced the three usual suspects known collectively as ‘BAT’ [Baidu, Alibaba and Tencent].

European media companies just don’t have access to the vast reservoirs of data on viewing habits, behaviour and preferences that are being mined and exploited by these digital giants. And for companies like Apple and Amazon, content may not even be a revenue generator, but a useful tool to draw eyeballs to all the other stuff they want to sell.

Delport urged European players to scale up and form alliances to tackle the competition. “We need to support, promote and back European and Latin content platforms – that is what Vivendi has done by acquiring Dailymotion,” Delport said. “It’s important for Europe, for diversity and cultural relevancy. Everyone in this room needs to take back control of their data.”

THEY MIGHT BE GIANTS

Mediaset

Vivendi, which owns French pay-TV group CanalPlus and Universal Music Group, is already one of Europe’s biggest players and is attempting to address the new landscape in a number of ways. Shortly after MIPTV ended, the company announced a merger with Silvia Berlusconi’s Mediaset in a bid to create a European rival to Netflix.

The merger sees Vivendi take full control of pay-TV platform Mediaset Premium, which owns rights to Hollywood movies, Italian football and the UEFA Champion’s League, and acquire a 3.5% stake in Mediaset, a leading terrestrial broadcaster.

Vivendi is expected to combine Mediaset’s content rights with its German streaming platform Watchever and expand the service into France and Spain. Since billionaire dealmaker Vincent Bollore became Vivendi chairman in 2014, the company has also acquired stakes in Telecom Italia and Spain’s Telefonica.

All these moves could help position Vivendi as a pan-regional content distributor to rival not only the likes of Netflix and Amazon, but also fellow European media heavyweight, Sky. The UK-based broadcaster and broadband provider was also conscious of the need to scale up when it bought out its German and Italian sister companies in 2014.

SHORT AND SWEET

At the other end of the spectrum, Delport also unveiled Vivendi’s new premium short-form content label, Studio Plus, during MIPTV. An attempt to address the growing use of smartphones as a distribution platform, Studio Plus is producing dozens of high-end series in the 10×10-minute format in six European languages for distribution on mobile phones.

Working with US and European telcos (not necessarily Telecom Italia or Telefonica), Vivendi plans to roll out the series to 600 million consumers in 20 countries starting this September. Another interesting statistic Delport dropped during his presentation – there are now 2.5 billion smartphone users around the world, 60% of which watch short videos every day.

So Vivendi is starting to behave like a US or Asian digital titan – scaling up and making content specifically for smartphone users. But this top-down approach from a traditional media company is not without risks.

Firstly, there’s the assumption that the millennial generation – who are the most avid consumers of content on mobile devices – are going to be impressed by premium short-form content.

Delport said Vivendi has already invested Euros25m in Studio Plus – Euros1m per series – but do millennials want to watch slick, scripted drama or are they happy to watch cat videos and people of their own age playing video games?

Expensive short videos may draw older viewers, who are unlikely to be fans of PewDiePie, but may not resonate with digital natives who want to be entertained but don’t always care about production values and budgets. If Vivendi wants a mobile presence, perhaps it should put more effort into building up an army of ‘Dailymotion Stars’ to rival the high-earning creators on YouTube, rather than spending millions of Euros on creating content itself.

CROSSING BORDERS

When it comes to scaling up, Europe has always struggled to build pan-regional companies in either the traditional media or digital space. In addition to the usual issues affecting a fragmented region – national borders, multiple languages and business rules – European content producers tend to rely on state subsidies and EC regulators have adopted a protectionist approach.

The same safeguards that allow content to be produced in languages spoken by only a few million people may also be barriers to distributing content freely across Europe’s entire population of 740 million people.

This is a contradiction that the European film industry is struggling with. Most European films are financed and distributed via a patchwork of subsidies and distributor commitments pulled together from different European states. Last year, European film producers reacted with panic to EC plans to create a Digital Single Market (DSM), reducing all those different sources of finance and distribution to a single entity.

Their concerns are understandable, especially as only US companies such as Netflix, Amazon or the Hollywood studios have the pan-regional distribution clout to step in and actually become that single entity.

But can traditional media players refashion themselves to become regional digital distributors? The rapid rise of companies like Facebook suggest it’s easier to build a digital giant from scratch than turn around an existing company. Vivendi may succeed where others have failed, but its difficult to be a digital disrupter, dreaming up new ways of creating value, at the same time as protecting your old word media revenues.

SEEDING THE FUTURE

One of the biggest obstacles to the creation of digital giants in Europe is not the scale or adaptability of existing companies, but the lack of a strong start-up culture backed by large quantities of risk-taking venture capital.

In the US and China, new companies emerge from nowhere, balloon overnight thanks to VCs that focus on market cap rather than revenues, swallow dozens of smaller companies, then either plateau or deflate, ideally after they’ve become profitable and the VCs have exited.

It’s no coincidence that the few digital bright spots in Europe – companies like Skype, Spotify and Supercell – all emerged in countries with a start-up culture such as Sweden, Finland and Estonia. But Skype sold out to first eBay, then Microsoft, before it could be classed as a giant and Supercell is now majority owned by Japan’s SoftBank.

Rather than retrofit existing companies, the answer may be to create an environment where entrepreneurs with crazy ideas can find investment and flourish. Media heavyweights like Vivendi and Sky could invest in these start-ups, as Sky has done with Malaysian streaming platform iFlix, or even eventually acquire them, as Vivendi has done with Dailymotion.

But some should keep their brand and independence and be allowed to grow huge. The end result could be a larger number of European companies mining all that valuable data on European consumers, rather than a handful of players based in Palo Alto, Tokyo or Beijing. It’s not beyond the realms of possibility that Europe could create a Facebook or an Amazon; Europe isn’t lacking talent or ideas. It’s just lacking the business culture for digital entities to grow.