Regulatory Peril And The Digital Dividend

Michael Hedges October 19, 2015 - Follow on Twitter

The digital dividend is presented as a grand, unifying solution to many ills. The platform is generous and spins wildly. Woe be unto those trying to slow it down and grab something. It’s best to discover joy flying with the electrons as friction can be painful.

In a judgment without precedent last week French media regulator CSA told digital TV operator Diversité TV its license will be withdrawn next June unless certain shareholder agreements are waived and a potential sale is put off. Diversité TV was awarded a license in late 2012 for Numéro 23, a channel intended to offer culturally and socially diverse programming. The company, formed by Pink TV owner Pascal Houzelot, attracted serious investors.

The wheels began to fall off this past spring when NextRadioTV CEO Alain Weill agreed to acquire Numéro 23 for €88.3 million. The CSA began the required examination. The big three traditional TV operators - TF1, RTL and Canal+ (Vivendi) - formally complained about the appearance of impropriety as Numéro 23 had been licensed for such a short time, the legal minimum of two and a half years. Amendments to media rules drifted through the French Senate to impose a 20% capital gains tax on broadcast licenses held less than five years, Culture Minister Fleur Pellerin tepidly favoring. Economy Minister Emmanuel Macron, charged with improving relations with any investor, opposed and the mission failed.

Eyebrows had been raised by programming on Numéro 23; less cultural and social diversity, more foreign soap operas and reality shows. The channel has raised barely a blip in Médiamétrie audience estimates, the best from American movies. NextRadioTV owns BFM TV and RMC Découverte as well as national radio channel RMC. In July M. Weill and telecom Altice chairman Patrick Drahi announced a transaction creating a new subsidiary of Altice to incorporate NextRadioTV, all subject to CSA approval.

During the Diversité TV due diligence the CSA discovered a heretofore undisclosed shareholder, UTH Media. "This transaction was concealed from the Council (CSA) despite several reminders,” said the CSA statement, quoted by challenges.fr (October 15). UTH Media took a 15% stake in Diversité TV under a shareholder’s agreement for a “fast transfer,” reportedly (LyonCapital.fr October 17) by early 2015. The French Audiovisual Act (1986) penalizes “substantial modification” of license conditions that later come to light; “authorization may be withdrawn without prior notice.” French law restricts non-EU nationals from media ownership stakes larger than 20%.

UTH Media is a Russian company principally owned by Alisher Usmanov, according to Forbes (March 2) Russia’s 3rd richest person. Mr. Usmanov has a variety of financial interests across several sectors; including Russian daily newspaper Kommersant, mobile telecom MegaFon, ISP mail.ru and, not to forget, the Arsenal football club. In recent weeks UTH Media agreed to acquire shares in Russian TV broadcaster CTC Media held by non-Russian nationals to comply with media ownership restrictions coming into effect at the end of 2016.

“To ensure the protection of all the principles and interests which the (CSA) has charge the repeal will take effect on June 30, 2016,” said the official notice. “This period also allows Diversité TV to renounce the shareholder’s agreement and the transfer conditions which led the (CSA) to withdraw authorisation.” All eight CSA members voted in favor of fading Numéro 23 to black.

With the most to lose from the CSA’s judgment, Pascal Houzelot vowed to “fight to the end,” quoted by Le Monde (October 17). During interrogatories with the CSA earlier last week he confessed that weakness in the French TV ad market made the asset transfer to NextRadioTV the "only way forward.” He also referred to the questionable shareholder’s agreement as “mundane.” An appeal to the French Conseil d'Etat is possible and not without precedent. In June the CSA’s refusal to allow cable and satellite TV channels Paris Première and LCI to migrate to free digital TV was overturned.

The French media scene is rapidly evolving, not pleasing everybody. Traditional broadcasters were never all that pleased with the arrival of new digital competitors, revenue streams potentially disrupted. More broadly there are new faces, more or less, in the sector, M. Drahi being one. There are others, including Le Monde shareholders Matthieu Pigasse and Xavier Niel, both minor shareholders in Numéro 23, moving into all online and more traditional media. At the same time, the French government and regulator CSA, occasionally at odds, are trying to get a grip on it all. Fortunately, it’s all ones and zeros.

See also in ftm Knowledge

Media in France

French audiences are moving fast to every new platform. Mobile and Web media challenges the old guard while rule makers seek new directions. Media life in France... and a few secrets. includes updated Resources 147 pages PDF (November 2011)

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