WEDNESDAY, JULY 01, 2015 |
Posted by: David Moffly
The French are a perverse group. Who else in the world would riot over Uber and terrorize poor Courtney Love in her Uber? Years ago I was in Paris pitching for the distribution rights to a very good French photo collection. After more than an hour of going through marketing strategy, distribution plans and financial analysis the business owners leaned back in their conference room chairs, lit their Gauloise cigarettes and wreathed in a haze of blue smoke said to me, But David "Its not about the Money." A few months later we were their largest distributor and the conversations were all about the money.
Amid the deafening hype yesterday around Apple's me too music service the news of Vivendi's acquisition of Dailymotion from Orange slipped largely un-noticed. This transaction has far greater potential to change the music landscape than Apple's attempt at catching up.
For us insular Americans here is a quick cheat sheet. Orange is the former France Telecom and the dominant Telco in France. Orange has owned Dailymotion for several years and has been trying to find a buyer for quite some time. Yahoo tried but the French Government blocked that sale. Vivendi is the parent company of Universal Music Group and Canal + (French Television Network). It is rumored that there has been heavy pressure flowing from parent Vivendi to Universal to eliminate "Freemium" relationships and increase margins and that Lucian Grange's (CEO - Universal) head is on the chopping block over this.
This brings us to Vevo which is an awkward partnership of Universal, Sony, YouTube and Abu Dhabi Media. Vevo dominates music on YouTube and has made very heavy investments on creating a high quality standalone platform positioned to win on all next generation video systems (Mobile, Set Top Boxes and OTT). This relationship has been characterized as a Joint Venture which means that profits are split amongst the partners at the end of the year. Universal is splitting its Vevo revenue (at the very least) with both YouTube and Abu Dhabi Media.
This leads to a number of potential re-shaping the playing field scenarios that will have seismic impact on consumers and on-line video.
The first and most unlikely is that Vivendi buys out Abu Dhabi Media and Sony and merges Vevo with Dailymotion. This would leave Sony out in the cold and stranded much like Warner Music on YouTube. This option is likely too expensive for Vivendi even with it's $31 billion dollar market capitalization.
The second and more likely scenario is that Vivendi forces Universal to pull back from Vevo and preference Dailymotion with exclusive video material. Revenue would not be shared with its Vevo partners and exclusive content from Universal's stable of global superstars can and will drive adaption. Though Dailymotion is only 2% the size of YouTube it is a quality world spanning platform. Despite the heavy haze of cigarette smoke it is always about the money and now Vivendi has a tool in its arsenal to drive revenue and more importantly net margin.
Pay attention here and not to Apple's lame efforts this has the potential to re-shape our on-line habits. Vivendi did not spend ~$240 million to let Dailymotion float along as a very distant Number 2.