Case study: By distributing Netflix, Canal+ chooses the platform strategy
Each quarter in its newsletter, Sociacom offers you to analyze a company's strategy. Technological innovation, managerial transformation, change management… This is the case study seen by the consulting firm Sociacom.
This month we are looking at the merger between Netflix and Canal+. Yesterday's enemies became allies by sealing a distribution partnership. Why this reversal on the part of the French encrypted channel? We tell you everything.
What does the agreement contain?
Since October 15,Canal + offers the Netflix catalogin its Ciné Séries pack for an announced total of 35 euros per month. Reed Hastings, the founding boss of Netflix, and the general staff of Canal+ led by Maxime Saada, chairman of the management board, announced it on Monday, September 16 at Vivendi's headquarters.
“Does Canal+ pay a guaranteed minimum to Netflix? How much does everyone get on new subscriptions? How many new customers do the two companies expect to gain? Iask aworld article.Radio silence on the financial details of the partnership.”Since the mid-September announcement, nothing has yet leaked.
In what context does Canal+ sign this partnership?
With 5 billion in revenue per year, the Canal+ Group offers its services in three major activities:
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TV program broadcasting, the group's best-known activity paid for by subscriptions and advertising
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Satellite broadcasting, of which he is one of the leaders
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Studio Canal, co-production/broadcasting and above all European leader in the distribution of films and series (Cinema, TV, DVD/Blu-Ray)
The group, which made 157 million euros in profit in 2014, suffered a loss of 128 million euros in 2017. The company led by Maxime Saada lost 300,000 French subscribers between 2017 and 2018 and the hemorrhage continues in 2019. Canal + announced this summer a social plan targeting around 20% of the workforce.
In 2018, the channellost Ligue 1 rightsfootball for the period 2020-2024, a year after losing the rights to the Champions League. It's a dead loss for this football specialist who won back theEnglish league rights.
What dangers does Canal+ face?
The continued growth of global giants such as Netflix (16% growth in France in just seven months in 2019), inevitably leads to a number of significant risks that players like Canal+ must face:
- Thedecline in television audiences, especially among youth
- The flight of subscribers to more diverse content
- The decline in DVD distribution shares in favor of streaming platforms
"We don't want the consumer to be lost in a sea of programs,stressed Maxime Saada at the time of the signing of the agreement, according to AFP.With the arrival of Disney, Apple or Amazon, "there will be many platforms, perhaps too many".
The number 1 of Canal + alludes here to the match which is announced betweenall SVOD platforms(video on demand by subscription). Apple TV+ arrives on November 1, 2019 in France. the launch of Disney+ will take place in the United States, Canada and the Netherlands on November 12, 2019. It will be necessary to wait until the end of 2019 or 2020 for its arrival in France. HBO Max, Warner Media's platform, is also expected soon.
It should be noted that Canal+ has a program budget ten times lower than that of Netflix and at most 20 million subscribers worldwide, compared to nearly 160 million. A million French customers already subscribe to Canal+ and Netflix in parallel.
Is this announcement surprising?
Canal+ had already attempted an operation of this kind by buying 33% of the Orange subsidiary OCS, thus allowing the encrypted channel and its subscribers to access Canal+ programs from the Orange box.
Since Orange, faced with the same issues, has signed partnerships with Netflix, Being, TfouMax, Disney, Discovery, FilmoTV, HBO, etc. thus becoming customer centric. This allows users to access a multiplicity of à la carte content, by administering a single account and a single subscription.
The announcement of the signing of the partnership between Netflix and Canal+ is therefore not a surprise or a revolution. It is simply a matter of responding to consumer needs and resisting the disruptive arrival of a powerful new entrant to the French market. This decision makes it possible to try to catch up via a platform strategy already favored by coopetitors several years earlier.
What is Canal+'s strategy?
As pointed outForbes, companies to fight against the “uberization” of their business model, have no choice but to apply a drastic transformation towards a platform strategy.
Angela Ahrendts, former strategy director of Burberry, had enabled Burberry's digital transformation to boost Burberry's turnover by 300% in a year in 2013. She had launched an appeal to all company directors, stating that not engaging in the digital transformation of their company leading to the death of their historical business within five years. Building on her success, Angela Ahrendts now exercises her talents within the Apple group.
“Platform strategies, which are one of the five characteristics of open organizations, are ultimately only the organizational translation of these cognitive mechanisms,explains Albert Meige, founder and president of Presans, in aforum for Forbes magazine.They make it possible to filter the possibilities and simplify our choices, on the Internet or elsewhere. They offer the possibility of combining the exhaustiveness and the relevance of the choices, the quantity and the quality.”
There are thus three types of platforms:
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“Marketplace” platforms (Amazon, Airbnb, Uber) that connect buyers and sellers.
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Platforms with a double-sided business model (Google, Facebook) which offer several different types of services targeted according to customer needs, for Google: a mailbox, a search engine, advertising space, the cloud, document sharing, etc…
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“Development infrastructure” platforms (Android, Apple Store) which connect developers, operating platforms and users via a MarketPlace.
The main advantage of a platform strategy lies in the company's ability to expand its market share by proposing new products or services by exploiting the network effect of its customers but also by collecting data. linked to the customer journey and the product life cycle.
Transform or die, the choice of Canal +?
Are theEuropean historical companieslike Canal + can still fight against the giants of the American digital native?
InTransform or die, Jean-Louis Beffa, who led Saint-Gobain for nearly 25 years, shares his analysis. He believes that European flagships can become the “next wave”, much more so than yet another new generation of pure-players.
In June 2019,Guillaume FauryAirbus' new CEO has announced that one of the priorities of his new strategy will be the implementation of the Skywise platform, in order to be more customer centric by bringing together in one and the same place, aircraft, airline, airport and passengers in order to offer new and ever more innovative products and services.
Canal + is moving in the same direction. The encrypted channel is beginning its transformation into a market place platform. It uses the existing platform where its content and its subscribers are to bring in other players who are also content producers. These new players will be able to reach other subscribers and Canal+ subscribers will be able to reach other content.
The bet could prove to be a winner if Canal+ manages to offer a better service."If, by aggregating offers, it is ultimately less expensive than adding single-theme services (Disney + Netflix + Warner etc.) and if a service like MyCanal makes it easy to browse content without having to go from one application to another, suppose Les Echos,Canal+ may be able to bounce back in a French market that has become very competitive."
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