Once in a while in the business world you see something so unbelievably stupid that you know the moment it happens that it will be taught in business schools as a case study in fatal mistakes for decades to come. We see this exact thing happening under our eyes in the French TV market as we speak.
Just to give you a quick recap: the TF1 group (dozens of channels including the leading channel on French TV, TF1) has – until now – distributed its content free of charge on French ISPs media centers. Partly, this is because the same content is free to air anyway. More importantly, TF1 is losing steam and looking for new revenue streams.
So as these contracts came up for renegotiation, TF1 started asking significant amounts of money (between 20 and 40m EUR a year according to Canal Plus) to all ISPs in the market. So far Canal Plus (who is not really an ISP but rather a TV distributor), Orange and Free have refused to sign, arguing the conditions were outrageous. TF1 stayed its ground, saying that in addition to the free to air stuff they were offering lots of extra value in premium content and applications.
Last week Canal Plus got fed up and shut off the feed. Overnight, TF1's audiences suffered. Their evening news - which is consistently the leader of news shows in France - came in second two days in a row, and even their leading saturday night show 'The Voice' lost 4,4% audience (or 15% of their normal market share) within a couple of days of the shut down.
Early this week, Free announced they were fed up as well and started displaying a message on their customers' TVs saying that they may soon have to shut down TF1's channels due to unreasonable demands by the content group. Orange is poised to follow suit. As Orange represents half of the broadband market in France, this could truly be a death blow for TF1.
There's little doubt where things will go. TF1 will have to cave in and agree to minusucule amounts of compensation (to save face, presumably), amounts which will not be disclosed. And seemingly everything will go back to normal.
Except that now everyone knows the linear content has limited to no value. There are 19 million connected TVs in France, 80% of which are connected via an ISPs TV Box (source: CSA). If Canal + - who only has 5 million customers (and dwindling) can have such a huge impact on TF1's shares it means that TF1 is all the more vulnerable to Free (20% market share) and Orange (44% market share) ? If we assume a linear impact, losing Free could mean a 40% market share loss for TF1 and losing Orange could mean an 80% market share loss !!! Losing both would probably decimate their audiences.
In other words, TF1 demonstrated to the world that their content had no value to ISPs: they fully control that relationship. I've been saying for years that linear content is no longer necessary to ISPs to sell value added services to end-users. The days of triple play are numbered. Thanks, TF1 for proving me right. Sorry about what your shareholders will no doubt say at the next meeting...