- French multinational media conglomerate Vivendi has purchased advertising group Havas for €3.9bn
- Havas is the sixth largest advertising group in the world
- Havas brings data analytics experience to Vivendi, while both companies are expected to benefit from synergies
It is much clearer what Vivendi’s €3.9bn ($4.4bn) purchase of ad group Havas means for France’s wealthy Bolloré family than what it means for the sports industry or even what it means for Vivendi.
The head of the family and Groupe Bolloré, Vincent Bolloré, has a fortune Forbes estimates to be $6.5bn, and he effectively controlled both Vivendi and Havas before the deal. He is the chair of Vivendi’s supervisory board, while his son, Yannick, is both on Vivendi’s supervisory board and the CEO of Havas.
In this deal Vivendi bought the Bollorés’ 60 percent share of Havas. The move allows the Bollorés to control both companies more cost-effectively and frees up capital for them and Groupe Bolloré, says François Godard, who follows European media and telecoms for Enders Analysis.
As Bloomberg columnist Leila Abboud points out, the move will allow Groupe Bolloré to pay down some of its €4.2bn of debt, a good chunk of which was borrowed to buy its stake in Vivendi.
Beyond the family affair, the deal points to competitive pressures that both Vivendi and Havas face in their respective businesses.
Havas is the sixth largest advertising group in the world and Godard says that it is more of a global company in many senses than Vivendi.
However, Havas faces stiff competition from the ‘big five’ ad firms, which include Publicis and Sir Martin Sorrell’s WPP.
In an internal memo about the deal Havas CEO Yannick Bolloré told staff that Vivendi wanted to preserve jobs and “allow us to develop our business in an industry which is undergoing rapid consolidation and is threatened by increasing competition from companies coming from other sectors”.
As for the “companies coming from other sectors”, the last couple of years have seen many companies enter the ad agency space – from legacy media companies looking to grow digital returns, such as the New York Times, to consultancies such as IBM, Accenture and PwC, who are getting into the marketing side of the business.
In terms of its impact on the sports business, Havas isn’t known as a sports specialist, but in a major reorganisation under Yannick Bolloré they created a sports and entertainment group to focus on these areas in their portfolio.
That group has produced a number of sports-related campaigns for clients, including campaigns for watchmaker Tag Heuer to raise the profile of its sponsorship of the New York City Marathon and for Coca-Cola in its sponsorship of the Rio Olympics.
The Vivendi-Havas tie-up does create a company that on paper is larger than WPP and in statements around the deal they spoke of synergies.
“This acquisition marks a major milestone in our drive to build a global leader in content, media and communication. It gives our group unique positioning and a major advantage in an environment marked by the ever-increasing convergence between content, distribution and communication. Havas brings its expertise in consumer science, data analytics and new creative formats to the entire Vivendi group,” Vivendi CEO Arnaud de Puyfontaine said.
But Godard is sceptical of what Vivendi brings to Havas. “Vivendi doesn’t bring ad technology or wider geographical spread, nor deeper operational capacity in any sense,” he says.
Havas does bring data analytics experience to Vivendi, but it is unclear how the marketing and communications company will help Vivendi address its competitive challenges, especially in terms of the increasingly competitive sports-rights market that its Canal+ division faces.
Canal+ has been experiencing rapid growth for several years in its Francophone African operations, but Godard said it has been struggling in France. In May it was reported that Canal+ in France had lost more than 401,000 subscribers in the past year.
Moreover, Canal+ has lost key sports rights to competitors in France, such as the broadcast rights for the Champions League to Altice. But Canal+ still has the French domestic rights for Ligue 1 from 2016 through 2020, which it secured for a few million shy of €1bn in 2013, and the very lucrative rights to Formula One.
Canal+ still has the French domestic rights to Formula One (Mark Thompson/Getty Images)
Vivendi has been trying to expand its operations into southern Europe and has been doing a complicated dance in Italy with Mediaset, the media group owned by former Italian prime minister Silvio Berlusconi. Mediaset has been struggling with their pay TV operations, in part because they haven’t been able to wring enough cash from their subscribers to pay for the spiralling costs of sports rights.
“Mediaset has been doing pay TV for more than 10 years. It has been a complete catastrophe. For years they have been looking for a partner,” Godard says.
They thought they had found that partner in Vivendi, which made a move to buy Mediaset’s pay TV division, Mediaset Premium. Godard said that the Bollorés and Vivendi were really interested in buying the entire group.
Mediaset is the largest free-to-air television provider in Italy and Spain, and they saw the purchase of Mediaset Premium as a “ticket to buying the whole Mediaset group at a later stage”.
But the deal collapsed last summer and recriminations flew. Vivendi said that when they opened the books to do due diligence, Mediaset Premium was in much worse shape than its owners had said. Mediaset then sued Vivendi. And when Mediaset’s stock collapsed, Vivendi bought shares at fire-sale prices until it controlled 30 percent of the firm.
Further complicating matters, Vivendi already owned nearly 25 percent of Telecom Italia, so Italian competition authorities called on the French group to divest itself of some of its holdings in either Telecom Italia or Mediaset.
Regardless of the outcome of the Mediaset drama, Godard, who is based in Italy, says that the Italian press believes that Vivendi will do a deal for Italian football rights through its share in Telecom Italia. However, Godard is sceptical of the idea that that is Vivendi’s ultimate goal. Telecom Italia carries Sky Italia over its network via IPTV, which already has rights to Italian football.
Vivendi has talked about a “European Netflix or a Latin response to Netflix” if it purchased Mediaset, but “it is all very fuzzy,” Godard says.
Fuzzy is a good way to describe the strategy behind the Vivendi-Havas tie-up. Beyond the Bolloré family’s interests, industry watchers are unclear what the ultimate goal is for Vivendi.
The advertising industry seems to be more enthusiastic, seeing synergies that even Vivendi isn’t entirely sure about. Media industry watchers, on the other hand, are wary not only about the ethical issues surrounding having a company operating on both the media buying and selling sides of the business, but, moreover, how such disparate companies will actually benefit from one another.
Vivendi seemed to realise that it had some issues in generating maximum value out of its units even before the Havas acquisition. In January the company hired Amos Genish to be its first chief convergence officer to “oversee the group’s convergence strategy between content, platforms and distribution”, the company said.
Vivendi is known more as an operations company and doesn’t have tightly integrated efforts across its holdings, Godard says, with its television, music, games and cinema divisions only cooperating “along the fringes”.
While Vivendi has been explicit in its interest in Havas’ data expertise, Havas said that it is keen to exploit Vivendi’s talent catalogue and that might be a place where the interests of the two groups overlap.
In addition to Canal+, Vivendi also owns Universal Music Group, which obviously has a treasure trove of data about music, but “you can’t force them to have a deal with Havas,” Godard adds.
From a sports industry perspective, the Havas acquisition does little to change the sports-rights marketplace, Godard believes. While we might see some more clever sports marketing, that is hardly an earth-shattering or market-shifting result.