TPS, the number two French satellite pay-TV platform, faces a critical couple of weeks as it hopes to stop Canal+ from being awarded the full football rights packages that were recently auctioned in France. As it stands, TPS will have no rights to broadcast football games beyond the current season and the following season.

TPS is arguing that the auction result is illegal because it gives Canal+ a dominant market position. The French anti-trust authorities will rule on TPS’ complaint, with its decision likely to have ramifications beyond the actual football rights themselves.

Nicolas Gindre, a media equity analyst at Credit Lyonnais Securities, told Interspace: “I think it is tough for the anti-trust authorities because if they let Canal Satellite have the majority of the exclusive football rights, then first they might run into the trouble of having TPS to postpone its break-even point by one or two years later than 2004.”

A decision in Canal+’s favour could also make a merger between the two platforms less likely. Gindre observed: “The second main problem is that it complicates the merger between Canal Satellite and TPS because if you give all of the rights of the exclusivity to one out of two, then the merger terms become heavily weighted in favour of Canal+. They will harp on the fact that they have the exclusivity of the rights.”

He continued: “Canal Satellite has 2.1 million subscribers, TPS has 1.2 million subs. So, even if you were to base a merger on 1 TPS subs = 1 Canal Satellite subs, TF1, which is the 66 per cent owner of TPS, would end up with roughly 30 per cent of the combined platform. I don’t think TF1 would accept being a minority shareholder.”

The football rights issue could essentially give Canal+ an unfair edge in any merger negotiations. Charles-Henri de Mortemart, a media equity analyst at Dexia Securities, told Interspace: “The issue for Canal Satellite is to get exclusive rights in order to be try and merge with TPS. Vivendi Universal CEO Jean-René Fourtou recently said that he is in favour of a merger between the two platforms and of course if Canal+ gets the exclusive rights, the parity will be in favour of Canal+ rather than TPS. I think this is the main issue.”

As well as possibly impeding a merger between the two platforms in 2003, a decision in favour of Canal+ would turn up the heat up on TPS, which could potentially lose a lot of subscribers. “Things could be difficult for TPS,” said de Mortemart. “Previously, when they shared the football rights with Canal+, it allowed TPS to gain a lot of subscribers. If you don’t have any football any more, it would be difficult for TPS to maintain its number of subscribers. It is already making losses. It would be bad news for TPS if their complaint failed.”

It is difficult to assess the impact for TPS. While having football in its packages is a positive, whether not having it would lead to a decrease in subscribers is hard to determine. Even under the current agreement, Canal+ is able to show more football, and consumers that are interested in football are likely to go with Canal+ anyway. On this issue, Gindre said: “The real driver for subscriptions within TPS is cinema. I don’t think there would be that much erosion in terms of their subscriber base.”

For the anti-trust authorities, the decision is a delicate one. If they rule in favour of Canal+, they are ramping up the pressure on TPS to the extent that competition in pay- TV could be significantly affected. Canal+ has agreed to pay 480 million euros ($506.2 million) for football rights between 2004 and 2007 (See Interspace issue 757). As it stands, Canal Satellite will be able to show three live matches a week, a weekly highlights show, as well having pay-per-view rights for other matches. A decision by the French authorities is likely to be made later this month. –Mark Holmes