French satellite pay-TV operator TPS is celebrating after the Paris Appeals Court approved a new agreement thrashed out between itself, pay-TV rival Canal+, and the Ligue Francais de Football (LFP) concerning football broadcasting rights in France.

The new agreement sees the existing football contracts, where the transmission rights are spilt between TPS and Canal+, extended by another year to the end of the 2004-2005 season.

This agreement invalidates an auction held last year by the LFP, which resulted in Canal+ securing all the rights to carry live French championship football games between 2004 and 2007. Canal+ bid a hefty 480 million euros ($483 million) a year to have exclusive access to football, leaving TPS in the cold. But, the French Competition Council annulled the auction results, leaving the football rights situation in a state of limbo.

As a result of the negotiations among the parties and various rulings, the LFP is likely to issue a new tender for the football rights packages in the 2004-2005 timeframe. The French Competition Council still has to rule on whether to approve the new deal, but a positive outcome would seem likely.

So, TPS appears to have staved off the threat of not having football coverage on its platform. Under the existing contracts, TPS has the rights to carry one live match a week, a highlights show, and have a number of other matches available on pay-per-view (PPV).

Guillaume De Posch, deputy managing director of TPS, told Interspace that his company was delighted with the ruling. “We have advocated to the French Competition Council that we should not lose football rights because we have been in the market since 1999. What our competitor did was an abuse of a dominant position. I really doubt in the long-term we will lose football rights because the French Competition Council wants to foster competition. I think it is an irreversible trend that soccer rights will be allocated among various platforms. Recent events have shown the league was not very comfortable about the idea of proceeding with its exclusive agreement with Canal+.”

The bid to keep rights to some football coverage is critical to TPS. The operator has close to 1.2 million subscribers in the French market. While Canal Satellite has more extensive domestic coverage of football, it is vital for TPS to have some kind of football offering in order to compete effectively.

Focus On Youth

TPS has also been very busy negotiating content deals. De Posch, who is responsible for programming, has been shoring up weaknesses in the operator’s programming offerings. In particular, the operator has recently beefed up its offering to the youth market, launching three new kids channels in the last two weeks – “Boomerang,” a Turner kids channel, “Eureka,” a channel owned and operated by TPS, and “TFOU,” an interactive channel produced by one of TPS’ shareholders, TF1.

The other priority for the company has been to improve its movie offerings. “On the movies side, we have signed two major deals in the last three months. The first one was an exclusive deal with Warner Brothers for PPV, premium rights. We have also signed with Buena Vista [Disney] for PPV and premium, excluding animation. That gives us a solid market share of U.S. studios. We now have around 70 per cent access to products of U.S. studio origin.”

The competition in France’s pay-TV markets is particularly intense. It is one of the few European markets that can support two satellite pay-TV platforms. The competition with Canal Satellite is fierce. Canal Satellite revamped its sports and movies offering significantly in 2002.

De Posch believes TPS has numerous advantages over its bigger rival. “Featuring premium movies is a very strong advantage. If you look at Canal Satellite, you have to take the combination of Canal Satellite and Canal+, which gives you a bill of 45 euros ($50.6), to get what we offer for 25 euros ($27.9). So, we have a price/quality ratio that is very aggressive. Another major advantage is that we have exclusive distribution of terrestrial channels. We have them all, in particular TF1 and M6, which Canal Satellite doesn’t have. And now, we have now a satisfying thematic offering with three new and original youth channels.”

While there has been talk of a possible merger between the two platforms, at this stage it seems unlikely. De Posch said: “In France, cable penetration is limited. You have less than 10 per cent cable penetration. The remaining 90 per cent is a shadow market, which you can try and expand into. As long as we continue to grow in terms of net acquisitions, why should the two platforms merge? If you look at the Italian situation, there were piracy issues and the two platforms were losing money. Here we have a situation where we are at almost breakeven and Canal Satellite is slightly profitable. So, the urge to merge is far less here in France than in other countries where operators were bleeding.”

Increasing ARPU

TPS also aims to improve its average revenue per user (ARPU) numbers this year. It hopes new interactive shows, such as “Nice People,” will have an impact. PPV football rights are key here, hence the importance of the recent announcement by the French Competition Council. De Posch concedes that “ARPU in the UK is much higher than the average ARPU in France” right now.

In terms of interactivity, De Posch admitted that the operator has had to “reorganise the way we approach interactivity.” While basic services such as weather forecasting have proved popular, De Posch is not a big fan of interactive shopping.

“Shopping is an aspect that we don’t necessarily think works in the French market for interactivity. Therefore we have stopped every interactive boutique. We have dedicated video home shopping channels on a TV channel, but a standalone interactive service is something we don’t think works. Interactivity represents around 2 per cent of our total turnover. But we believe it is a necessary ingredient to offer a modern product to our viewers. We are focusing particularly on strategic services such as Electric Programme Guide (EPG), horse-betting and games.” De Posch said.

Subscribers Needed

With all the changes in programming and the positive developments in the football rights row, things are looking up for TPS. De Posch told Interspace that the operator hopes to add over 200,000 subscribers this year. “In terms of growth for 2003, it should still be in single digits. That is what we are shooting for. This is now our second year of free cash flow. We will reach profitability at the end of this year. We would need more than 1.3 million subscribers to achieve this, which is less than we originally anticipated. We are making substantial efforts in terms of the management of our cost structure to bring this number down.”

Contact: Virginie Halleux, TPS, E-mail: [email protected]