The Canal + Group: the undisputed leader of pay TV in France

Article  by  Franck FINANCE-MADUREIRA  •  Published 07.12.2010  •  Updated 05.01.2011
Since its founding in 1984, Canal+ has enjoyed considerable popularity despite its limited audience, becoming a major player in the French audiovisual landscape.


As the leading pay television operator in France, the Canal + Group is best known for the channel that bears its name, which made a big splash at the time it was set up in 1984. It developed from the channel packages offered along with Canalsatellite, which later became Canalsat in 2005, and succeeded in absorbing its major business competitor, TPS, after a lengthy battle in 2006, a merger expected by the financial markets and industry experts for many years and from which the Canal+ group emerged victorious. The group is fully owned today by Vivendi, which joined up with the Lagardere group (for 20%) in the capitalisation of Canal+ France, which owns 49% of the Canal+ channel (the remainder belonging to various minority shareholders such as Pathé, Credit Suisse First Boston and Edmond de Rothschild)[+] NoteConsult the shareholder breakdown and logos of various entities in the corporate brochure on the Canal+ websiteX [1].
Canal+ group’s developments abroad and in the cinema film production and distribution sector have turned it into one of the major audiovisual players in France and in the provision of French-language films abroad. But with the advent of
quadruple play, some sizeable challenges lie ahead for the group. Since the emergence of terrestrial digital television (TNT) in France and the development of global operators whose television offering supplements their provision of telephony (fixed and mobile) and internet services, Canal+ has had to change its broadcasting technology and commercial strategy. Faced with operators that, in some cases, have developed their content offering (mainly Orange), the Canal+ Group has been forced to adapt to fresh competition on a market that has undergone a real revolution in its approach to broadcasting and usage. But it still enjoys an extremely positive image as is indicated by its ranking – in fourth position in the yearly survey by Cabinet Universum that enquires into students’ favourite companies.

Technology issues, sources of risk

Canal+, since its inception, followed by the establishment of Canalsat, picks up a substantial amount of revenue (assessed at 100€ per year per subscriber to one of its exclusively self-distributed offerings[+] NoteRead on this topic the Arcep Avis N° 2009-0172 on the exclusivity relations between electronic communications operators and distributors of content and services.X [2]) managing the method of broadcasting via the set-top boxes that only the channel provides (the rental of which is included in the subscription charge). The group has always sought to keep tight control of this technology as a source of captive revenue. But the convergence towards a single broadcasting system, i.e. terrestrial digital, the arrival of new broadcasters marketing the group’s offerings and the gradual transition to the HD (high definition) standard have changed the way game is played. Banking on innovation, the hallmark of the group, Canal+ has launched several waves of technological modifications over the last few years, with the shift away from the generalised set-top box to Pilotime (the first recording decoder providing live freeze-frame in 2003) through to the Cube launched in 2008 making it possible to view on demand avant-premiere programmes acquired by the channel like television serials, as soon as they had been aired in the USA.
Nonetheless, the group had to revise the direct and exclusive marketing model on which its offerings were based and allow other operators to make them available to their subscribers (e.g. Numericable, Orange and Free). The arrival of the triple play system (fixed telephony, internet and television), which in the meantime became quadruple play (adding mobile telephony), actually profoundly altered attitudes in terms of subscriptions and the way channel packages were received.

2009 was a rather significant year for the Channel+ group in terms of development difficulties following the merger with TPS and the diversification of its offering. Canal+ found itself managing more than ten models of household set-top boxes and is now starting to migrate all its subscribers to digital – a job that should be fully completed by the end of 2010.
The implications of these technology problems are reflected in the overall cancellation rate, which was 13.3% in the first quarter of 2009. It should be noted that it fell substantially in the first quarter of 2010 to 12%.
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Diversification, territories and new vectors

If the group is today able to lay claim to having 12.5 million subscribers in the world, it is because it factors in its developments on the five continents, mainly in the form of agreements with existing local operators. In addition to its location in the Overseas Departments and Territories, the Canal Overseas subsidiary is the leading French external audiovisual group established in more than 40 countries, in sub-Saharan Africa (Canalsat Horizons) and in Poland, where the joint venture Cyfra+ boasts more than 1.5 million subscribing households. Last January, the group created a package in Vietnam, K+, under an agreement with the local channel, VTV. Developments in the group also involve diversifying broadcasting vectors and continuous monitoring of innovations.
In addition to broadcasting via its own set-top boxes, and via the boxes of market operators, the Canal+ packages are adapted to ‘multi-support’ transmission on television sets connected to the internet, Xbox 360 connected consoles and portable consoles like PSP, as well as mobile phones and smartphones like the iPhone and even the Apple iPad or computers, thanks notably to an agreement with Microsoft when Windows 7 came on to the market.
The ‘Canal+ Active’ department was the first in France to launch on-demand services, catch-up TV enabling subscribers to Canal+ or Canalsat to view on their television set or computer most of their package programmes on demand. This service has been very successful with more than 20 million programmes viewed in the course of 2009. Canal Play, a bi-media offering (TV and internet) of pay VOD (Video on Demand) completes this offering and has clocked up 15 million downloads since it was launched at end 2005. After starting work on making some of its channels accessible in High Definition, Canal+ also conducted trials during the World Football Cup in South Africa so as to be ready to broadcast live and in 3D, thus preparing the ground for the next technological revolution in the pipeline.
On account of its proactive approach with regard to new vectors and innovative new services, the Canal+ group has succeeded in establishing itself at the cutting edge in these new territories, regaining the image of the pioneering broadcaster that seemed to have lost its way since the showcase channel was launched in 1984.
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The range of channels, the key feature of the packages

The Canal+ channel is the group’s flagship offering and should remain so. Right from the start, it put out unreleased and recent films and a range of football matches shown on an exclusive basis. It turned its unencrypted time slots (morning, midday and prime time access) into a place in which to come up with innovative and creative programmes, characterised by the popularity and longevity of “Nulle part ailleurs” (Nowhere else) by Philippe Gildas and Antoine de Caunes and a flagship access programme like “Le Grand Journal” which, after some hesitation about the timing, recovered the “Canal spirit”, a reputation for humour and trend-setting, not to mention a pornographic slot scheduled on Saturday at midnight and “Les Guignols de l’Info” (Spitting Image) devoted to political satire which also did a great deal for the channel’s rebellious image. The rollout of the Canalsat package was further accompanied by the creation of a range of channels such as I-Tele in 1999. This rolling news channel, initially a subsidiary of the channel and subsequently of the Canal+ group, still represents a sizeable challenge for the group faced with competition from LCI (established by TF 1 in 1995 and BFM TV of the NEXT group set up in 2005).
Following the merger with TPS, some duplicate channels will disappear in order to constitute coherent offerings that will represent a range of options for the subscriber: Canal+ France holds the Premium package covering Canal+ and its variations (Décalé, Sport, Cinema, Family and the HD version of Canal+), Sport+ and TPS Star plus Multithematiques, a 100% subsidiary that puts out channels like Cinecinema (with 9 alternative themes), Planete (4 documentary channels), channels for children (Teletoon and Piwi) and niche channels (e.g. Comedie, Jimmy, Seasons, Infosport, Cuisine TV).
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The battle of the programmes: cinema and football in the forefront

The battle of the programmes clearly represents the sinews of war for a pay television operator. Cinema and sport (especially football) were already the highlights in terms of differentiation and appeal when the Canal+ programme was launched and it is in these two areas that the TPS package (a joint offensive by France Televisions, TF1 and M6) attacked the lone pay operator head-on, following the launch of Canalsatellite, before admitting defeat in 2007.
Cinema and Canal+ had, from the outset, a special relationship inherited from the legal framework put in place to create the first pay television operation in France. The channel was authorised to air films earlier after their cinema release in return for an undertaking to finance the film industry by devoting a portion of its turnover to it. Today the channel sets aside nearly 170 million euros per year in the form of aid for film production and benefits in return from a VAT rate reduced to 5.5%, an advantage which the French government recently called into question before backing down, through the person of the President of the Republic, as a result of the virulent reaction of industry professionals.

But following the debate, the tax due by Canal+ to the Cosip (fund to support the audiovisual programme industry) was raised from 4.5% to 6.7%.
The various renewals of agreements between Canal+ and the film industry, which establish the transfer of 12.5% of its turnover to European productions (9.5% of which for French productions) have really altered the business model of film-making in France, enabling a record number of works produced and distributed in France to be kept going year after year, while creating beneficial competition in the industry (TPS formerly, Orange nowadays).

To illustrate this dynamic, the CNC (National Centre for Cinematography) indicated in its 2002 report that the total investment by television channels in French cinematographic productions had more than doubled during the 1990s, rising from 367 to 749 million euros (between 1001-2001).

As of 1998, a production and distribution was set up under the name of Canal+ Productions. Today StudioCanal, a wholly-owned subsidiary of the group, is a major European player in the financing, acquisition and distribution of films. The subsidiary is a producer, especially in partnership with Universal Pictures (Vivendi group) under Working Title, as well as distributing films for cinema release, in DVD and for on-demand pay services. Furthermore it enjoys special arrangements with events as outstanding as the Cannes Festival and the Cesar and Oscar ceremonies, which provide it with a high profile in the corridors of power and decision-making on ‘planet-cinema’.
The major prize in terms of sports television rights concerned the other area showcased at the channel’s launch: football and primarily the French League 1 championship.
The League 1 television rights also benefited from TPS entering the fray against Canal+. They increased by a factor of twenty between 1988 and 2008, i.e. up from 33.5 euros to 668 euros per year between 2008 and 2012.
But Canal+ and its packaged channels dedicated to football managed to handle the situation well, remaining the benchmark for pay channels amongst football lovers, despite the determination of Orange which, when launching its own channels, was clearly targeting its rival in respect of both film and football with the launch of Orange Cinema Series and Orange Foot (becoming Orange Sport six months later) and which threw in the towel on football rights leaving the negotiations for 2012 open.
Far-sightedly, Canal+ bought a company specialised in organising sports events like the Tennis Open in Lyons (Occade Sport) and set up Canal Events, which also handles the marketing of the League 1 rights around the world.
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Television series: fresh content, fresh issues

Competition on programmes is playing out in a new arena, the television series that over the last ten years have become a major area of confrontation between broadcasters. Canal+ realised this early on and was the first French audiovisual group to take a close interest in the new wave of American ‘quality’ series like ‘Desperate Housewives’, ‘Weeds’ and ‘Dexter’, even at first giving them a trial run on ‘Jimmy’, another group channel, as was the case with ‘Six Feet Under’ in 2001. So it was no coincidence if, at the launch of the Orange Cinema series in 2008, the operator highlighted its agreement with HBO, an American cable channel known to be at the forefront of the new generation of television series.
But Canal+ was also able to develop its own series under the label ‘Creation Originale’ ready to compete with their American predecessors (Mafiosa’, ‘Maison Close’ and ‘Engrenages’ – sold to the BBC) in terms of quality, audience numbers and particularly their propensity to stimulate subscriptions to its packages, an urge which constitutes the core business of a group selling entertainment.
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From a narrow audience to an audiovisual giant

The paradox in the group’s development is that it is based on a channel with a strong image and whose influence has always been greater than its audience share, which stood at about 3.1% in 2009.
Canal+ has managed to exploit this major asset to build up the largest French audiovisual group.
While the group posts financial results constantly on the rise, it has had to stay in touch both with the technical upheavals due to the new media and developments in the pattern of consumption and engage in regular negotiations with the various legal and professional groups with which it is closely connected.
As the major source of finance for the French film industry, the major purchaser of sports rights, operating with technologies in constant flux in a universe severely regulated by the state, the Canal+ group has demonstrated its ability to keep the many risks to which it is exposed under control. Its major role in French film production is more and more momentous even if the group has the impression that it bears the financial burden of defending the ‘French cultural exception’. Its recent development of channel packages in joint ventures with Vietnam and Poland may reflect a determination to expand abroad beyond the traditional confines of the French-speaking world.
The Canal+ group depends heavily on its subscribers and they have demonstrated greater volatility over the last few years. Along with its ever more diversified subscription arrangements (weekends only, a low-cost Canalsat offer), it has to keep up its level in terms of producing new channels, creativity in programmes and the attractiveness of its offering.
And this holds true even if the competition never holds out for long. The management of Orange is said to be negotiating to have their Cinema Series taken over by the Canal + group. With the plan to sell off the channel dedicated to sport, that would mean the end of Orange’s policy on channel introduction and the return of the Canal+ group to its position in 1984, a quasi-monopoly on introducing pay television channels in France. But the strength of the group remains very much tied to what made it a success in the first place: the image of its ‘premium’ channel.

Translated by Christopher Edwards
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Key Data

Chairman of the Canal+ group : Bertrand Méheut
Turnover 2009 : 4.553 million euros

Payroll (end 2009) : 4,347

Subscriptions: (end 2009) : Canal+ France (Mainland France, Overseas Departments and Territories, Africa) has 10.8 subscribers to its television offerings. Aggregate subscriptions to the Canal+ group (including Poland and Vietnam) reach 12.5 million.

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Selective Bibliography

Valerie LECASBLE, Le Roman de Canal+, Grasset, 2001 (The novel of Canal+)
Josepha LAROCHE and Alexandre BOHAS, Canal+ et les majors américaines: une vision désenchantée du cinéma-monde), L’Harmattan, 2008 (Canal+ and the American majors: a disenchanted vision of world cinema)
Christophe FOUASSIER, Le Droit de la creation cinematographique en France, L’Harmattan, 2004 (The Law on cinematic creation in France)

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