French Billionaire Is the Odd Man Out In Italian Drama

(Bloomberg Gadfly) -- Billionaire Vincent Bollore seems to have become the odd man out in Italian television.

His French media company Vivendi SA had hoped to forge a video content alliance in Italy to buttress it against the European encroachments of Amazon.com Inc. and Netflix Inc. First there was the attempt to secure control of the pay-TV arm of Silvio Berlusconi's Mediaset Spa. Then the effort to create a content joint venture between Vivendi's own Canal Plus broadcasting arm and Telecom Italia (in which Vivendi's the biggest shareholder).

Yet Bollore, who built a fortune through ambitious dealmaking, seems to have been left without either option. It's a real blow to his hopes of creating a southern European media powerhouse.

The Mediaset campaign descended into a legal fight after Vivendi pulled out of a deal to buy the pay-TV unit in 2016. Now, Mediaset says it will team up instead with Sky Plc's Italian arm. The two will broadcast each other's channels, and Sky may end up buying the Italian company's pay-TV business.

Bollore's other plan to get Telecom Italia and Canal Plus to merge their content operations has all but hit a wall. Activist hedge fund Elliott Management Corp has complained that the venture would essentially hand control of Telecom Italia's content to Vivendi, even though the French company holds only a minority stake in the Italian carrier.

Bollore had wanted Mediaset's pay-TV division to become part of the bigger content venture. Now, rather than having a dominant Italian TV provider, he'll be left facing a strengthened Sky and Mediaset combination.

Such alliances have been made necessary by Amazon and Netflix's competitive threat. The U.S. companies can theoretically drop $100 million on a new TV series, and distribute it to almost 200 markets at the flip of a switch. Rather than needing a mega-hit in one market, all they require is for each series to be a modest success in several countries to secure a return on their investment.

That's a big problem for local broadcasters, who have less cash, less technology expertise and limited international presence. Netflix will spend as much as $8 billion on programming this year, while Amazon spent about $4 billion last year. Sky and Mediaset's combined revenue in Italy last year was $5.1 billion. Clubbing together makes it slightly easier to compete.

One could suggest that it might be time for Bollore to think about looking beyond Italy. The battle with Elliott for control of Telecom Italia is fraught, with analysts at Liberum Capital Ltd. suggesting Vivendi may not have the stomach for the fight. But the billionaire has deep and long-standing ties to the country. A retreat would be painful.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Alex Webb is a Bloomberg Gadfly columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

To contact the author of this story: Alex Webb in London at awebb25@bloomberg.net.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net.

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