Exclusive Interview: CANAL+ Group’s Bertrand Meheut

PREMIUM: The chairman of CANAL+ Group, Bertrand Meheut, talks to TV Europe about the impact CANAL+ has had on the French media industry and his plans for the company’s future—always maintaining a commitment to quality and innovation.

TV EUROPE: Since its launch in 1984, how has CANAL+ changed and improved the TV landscape in France?
MEHEUT: That’s a broad question that calls for an elaborate answer.

CANAL+ has been a pioneer in television from the day it launched on November 4, 1984, when it became the first privately owned TV channel in France. At that time, there were only three channels in France, all state-owned and run. Since then, CANAL+ has been at the forefront of many developments in the industry, starting with content.

Over the years, CANAL+ has played a crucial role in building up the popularity and developing sports that had very little airtime, including French premiership soccer, rugby or golf. The channel quickly became [synonymous with] offbeat entertainment shows and recently released movies. CANAL+ is also well known for world-class TV series after moving into original programming with shows that have since aired on prime time in many countries, including the U.S.

Being the first media group in France to introduce set-top boxes in people’s living rooms, CANAL+ has always been a driving force in implementing new technology. We were the first company to launch digital satellite TV in Europe. We pioneered HD, as well as high-end, IP-enabled set-top boxes. In 2007, we triggered consolidation of the French pay-tv market when we acquired rival DTH platform TPS. Today, our pay-TV business reaches 6.1 million French households.

We have recently expanded into free-to-air TV, broadening the market. In just two years, our main channel, D8, has reached fifth place nationally in overall ratings, and first alternative channel behind the four historic networks [TF1, M6, France 2 and France 3].

At the same time, we moved aggressively in the Internet video business with CANALPLAY, a fast-growing market leader in SVOD. Our channels on YouTube are among the top entertainment channels in France.

We are by far the largest and most profitable media group in the country.

TV EUROPE: How has CANAL+ supported the French film industry?
MEHEUT: The story between CANAL+ and the French movie industry goes back 30 years. In 1984, we committed to investing roughly 10 percent of our revenues in French movie production in return for the right to broadcast those movies just one year after theatrical release. This system has helped France build one of the leading and most dynamic movie industries in Europe and even the world. In 2013, we invested a total of €150 million in just over 110 movies, which represents half of all the movies produced that year in France.

TV EUROPE: You have said that one of the priorities this year is to strengthen the group’s program offering.
MEHEUT: Strengthening our program offering is part of our everyday job. Competition in this business is tough and, as a premium channel, we want to ensure that our subscribers always get the best content. Obviously, sport is key. We already have been pretty successful this year in this domain after winning key soccer rights, which allows us to secure top French championship and European Champions League games for several more years. We also won exclusive rights to the French rugby league, the second-biggest sport in France. We have a strong lineup of original series, which have become essential in attracting new subscribers, almost as much as movies, of which we air more than 400 first runs every year.

TV EUROPE: Tell us about the importance of original productions and STUDIOCANAL’s role in providing them.
MEHEUT: Over the years, original production has become an important reason why people subscribe to pay TV. This is fairly new in France, where for a long time pay TV was driven essentially by movies and sports. But these are not programs we always have great control over. Sports rights can be lost. This is why we decided to move aggressively into original programming and give the public another good reason to pick us over anyone else. Since then, we have been able to produce exciting, high-quality drama with production values way above the French average. Some of them, like Spiral, The Returned or Borgia, sold in many countries and aired in prime time on leading networks. But we feel there is still room for improvement in order to eventually reach U.S. production standards. Most of the previous projects were initiated and developed by CANAL+. But it makes sense to rely more heavily on our affiliate STUDIOCANAL, already a European leader in movie production, which has recently expanded into TV series production by acquiring Tandem, a German company behind the success of The Pillars of the Earth and Crossing Lines, and U.K.-based company Red Productions (Queer As Folk).

TV EUROPE: Viewers no longer watch movies and programming only on linear channels. In what ways are you offering films and TV shows online and on video on demand?
MEHEUT: TV is still very popular in France, which has many differences with the U.S. market. Most people here get their TV over DTT, which carries 25 free channels, or as part of broadband triple-play packages, which cost less than €30 per month and include up to 200 basic TV channels. So this “cord-cutting” phenomenon that is much talked-about in the U.S. is not something that we see at all here in France. This doesn’t mean that online video watching is not growing. In fact, there are many services available, most of them through the ISP’s set-top boxes. CANAL+ launched its own SVOD offer two years ago, CANALPLAY, which is now one of the market leaders with more than 450,000 subscribers. This figure has more than doubled in a year. In addition, CANAL+ has developed a service called MYCANAL, which gives subscribers access to all the shows that are part of their packages, including sports events, live or on-demand, on any IP-enabled device (PC, smartphone, tablet, etc.). This is pretty much like TV Everywhere without any kind of restriction and at no extra charge (MYCANAL is included in the subscription fee).

TV EUROPE: What other innovations are you offering to make sure your subscribers enjoy a unique experience?
MEHEUT: At a time when video offers are proliferating, fuelled by the boom in online services, we believe that brand is key. We find that customers faced with almost infinite choice will tend to turn to familiar brands that can help them decide. This is why we have put some efforts in designing a recommendation engine, Eureka, which we are constantly improving. When it launched a few years ago, it was the first of its kind to suggest programs based on what people watch on TV.

Providing high-end set-top boxes is also a way to ensure subscribers get the best service available, which is only normal for a premium channel. Our set-top boxes typically feature DVR capabilities that can be remotely controlled via the Internet to access on-demand services, the EPG, HD, and of course, Eureka. Last but not least, MYCANAL is a one-stop-shop app giving our customers access to all the content included in their subscription packages, live or on-demand, on any device with an Internet connection.

TV EUROPE: Tell us about the free-TV channel D8. What factors have been contributing to its success?
MEHEUT: D8 was re-launched in September 2012 after we acquired the channel, then called Direct8, from Bolloré Média. Two years on, D8 ranks number one among non-legacy channels, and fifth overall. The success is due to a mix of clever investment in content and bringing in the right talent.

TV EUROPE: Has the sluggish French economy negatively impacted your subscriber base or does pay television remain a strong value proposition?
MEHEUT: Since the beginning of the economic downturn, our overall subscriber base has been growing continuously. This growth was mainly driven by overseas performances, particularly in developing countries. In France, things have been more difficult. When the economy is depressed, people tend to refrain from committing to new subscription contracts, which obviously has an impact on gross additions. But we did not see a big impact on churn, which actually is on a decreasing trend. I think a lot of subscribers realized that premium TV is one of the cheapest ways to get entertained, providing unbeatable dollar-for-dollar value when compared to the cost of taking a whole family to the movies or to a sports game. This is why CANAL+ proved pretty resilient overall, whereas CANALSAT, which is also facing tougher competition from free or near-free TV packages (over DTT or IPTV), struggled a bit more.

TV EUROPE: How is the CANAL+ Group increasing and diversifying revenues?
MEHEUT: Pay TV in France is still our core business, representing about three quarters of total revenues. But in recent years we have expanded into other areas, starting with pay TV outside of France where we have built up on existing businesses, and in some cases, started new ones. Our largest market outside of France is now Poland after we acquired a rival DTH platform and merged it with our own to form nc+, which has about 2.2 million subscribers. In Africa, where we have now operations in over 30 countries, we have had tremendous growth. Our subscriber base there has nearly trebled in three years to reach 1 million at the end of 2013. Vietnam, which we launched a few years back in partnership with state-owned broadcasting company VTV, is starting to pick up with over 600,000 subscribers. All in all, we now have 4.4 million subscribers outside mainland France, which is nearly one third of the group’s total subscriber base.

Advertising is obviously another area of growth. We now own three national channels, all available over the air on DTT and on all existing broadcasting platforms. Apart from D8, we have an all-new channel, i>TELE, with an audience share of just under 1 percent and a music channel aimed at young audiences with around a 1.5-percent audience share. Our goal is that our ad-sales division becomes the market leader among the much-sought-after AB consumers.

Content production and distribution is also a key growth area for us. We want to turn STUDIOCANAL, today a European major, into a global player. STUDIOCANAL operates directly in the three main European markets after we acquired distribution businesses in the U.K. and in Germany. We recently moved into Australia and New Zealand. The company produces a dozen movies a year and also manages one of the largest film catalogues in Europe, which, in addition to regular broadcasters, can now be leveraged with fast-growing Internet video providers. As mentioned previously, STUDIOCANAL is moving aggressively in the production of high-quality TV series at a time when demand for such shows is soaring all over the globe.

Finally, as mentioned before, we have stepped up our presence on the Internet by creating a new division responsible for designing and marketing new offers, either ad-funded or paid-for by customers. Already in charge of developing CANALPLAY and running our YouTube venture, this division is behind the launch of an Internet-only CANAL+ offer in Canada in partnership with Dailymotion.