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The Player From Paris


Media: TELEVISION

THE PLAYER FROM PARIS

A restless night owl, Pierre Lescure does some of his best thinking at 2 a.m. In his office or at home, the chairman of French television powerhouse Canal Plus often hunches over a fax machine into the wee hours, firing off handwritten queries to company managers on everything from new programming to strategic alliances. Once, he phoned a company executive long after midnight to complain there was nothing good on TV. The pair hatched the concept for the hugely successful Canal Jimmy, an all-night channel devoted to old and new American TV serials, cult movies, and pop music.

Those sleepless nights have paid off big for the 50-year-old Lescure, a former TV reporter who joined Canal Plus as programming director 11 years ago. Then, it was a fledgling pay-TV company so mired in initial losses it was nicknamed Canal Minus. Today, it's the world's biggest pay-TV company by sales, with $2.1 billion in revenues and a host of channels beaming movies, talk shows, and sports to 6.4 million homes throughout Belgium, France, Germany, Spain, and French-speaking Africa.

Now, Canal Plus's hard-driving chairman has a new vision for his company. While defending his dominance in European pay TV against all comers, he plans to challenge the English-language media giants for a top spot in the global television market. No other European broadcasting company has achieved that distinction. To extend Canal Plus's reach around the planet, Lescure is weaving a web of joint ventures with such heavies as America's Tele-Communications Inc. (TCI), Germany's Bertelsmann, and Japan's Sony Pictures Entertainment (table, page 70F).

DEEP VAULT. That's for starters. Beyond the year 2000, Lescure sees Canal Plus as a global king of content, a producer of high-quality offerings adapted to local markets from India to the U.S. Canal is also amassing a huge library of programming rights, from cartoons to documentaries and feature films, and it is angling to reinvent European filmmaking. Says Lescure: "Where this market is going, imagination is the only limit."

It's a daunting agenda. Among Continental media companies, only Bertelsmann has entered the winner's circle of top global players. But the time is right for bold moves, with Lescure's core market on the brink of radical change. The launch of two new satellites bringing digital broadcasting will soon transform the Continent's protected television market by vastly multiplying the number of stations available to broadcasters. European viewers will soon have their pick of hundreds of channels, most of them in the pay-TV format.

Lescure already has plans to launch 40 new digital pay-TV channels. He figures he can capitalize on a loyal French audience of baby boomers and Generation Xers who avidly follow such Canal Plus offerings as Canal Jimmy and Les Guignols de l'Info, a puppet show that lampoons the French Establishment. "The big success of Canal Plus is the quality of their programming," says Philippe Cassagnes, media analyst for Nomura Bourse in Paris.

SATURATION POINT? Yet the sudden arrival of some 600 channels over the next year will create new dangers in pay TV. "There will be an oversupply of channels," warns Allen Marmian, media consultant at Price Waterhouse in London. "Somebody is going to get burned." Lescure may even find himself squaring off against the media empire of Rupert Murdoch: Sources say Murdoch has signed a preliminary agreement with one of Europe's strongest broadcasters, Compagnie de Luxembourgeoise de Telediffusion (CLT), to set up a Europewide pay-TV company. Lescure doubts that Murdoch and CLT will consummate their alliance, but he concedes that Canal Plus "might be shaken up more than in the past by the competition."

Lescure is moving to find some big pals of his own. He may soon announce a joint venture with cable-TV powerhouse TCI, which is likely to pay roughly $100 million for a 50% stake in the venture. That would consist of four existing Canal Plus channels, plus plans to develop new channels for foreign markets. At the same time, TCI networks in Asia and Latin America might also become an outlet for Canal Plus programs.

To fill the airtime on its 40 fledgling channels and provide content to its new allies, Canal Plus plans to become a "channel factory," mixing its own in-house programming with purchased shows, movies, or sports events. The most successful concepts for channels will be exported to Asia, Latin America, the U.S., and elsewhere in Europe--but adapted with the help of alliance partners for those markets. One example already in the works is Voila, an English-language channel featuring the best of European fashion, culture, art, travel, and music, expressly created with TCI for the U.S. market, set to air in 1996.

PROFIT PLUNGE. This will all cost money--big money. Canal Plus and its partners will have to spend hundreds of millions of dollars on TV programming and film production. Canal Plus is also investing $80 million on new digital services, including the decoder-box technology that will unscramble digital satellite signals to the homes of subscribers.

Investing in the digital future is taking a big bite out of earnings. Profits dropped last year by 50%, to $125 million. Overall earnings are expected to rise only slightly for 1995 and 1996. Meanwhile, the stock, at $173 a share, has outperformed the Paris market in the past six months, but it is well below its 1993 high of 285.

Analysts expect earnings to rebound in 1997, to $189 million, as subscriptions to new digital satellite services start rising. An added comfort is a $510 million cash hoard and no debt. But the pressure will remain, especially if the explosion of new pay-TV services forces prices down. Laurent Carozzi, media analyst at Paribas Capital Markets in London, expects new entrants to offer subscribers lower prices than Canal Plus, which charges $36 a month in France, compared with $11 a month for Home Box Office Inc. in the U.S.

Yet Lescure insists his programming quality will always be able to command a price premium. Seated in his office on a red hassock shaped like a woman's lips, he gazes at a bank of six TV sets showing Canal Plus programs and those of rivals. His company's offerings all look like great shows to him. Breaking into a grin, he asks: "Do I look worried?"

Lescure has certainly thrived at Canal Plus so far. As a news director at station France 2, Lescure took all of five minutes to accept an offer in 1984 to become head of programming at the newly founded Canal Plus. The request came from Andre Rousselet, then a top executive at media conglomerate Havas and a golfing buddy of former French President Francois Mitterrand. Using funds from Havas and his political influence, Rousselet set up the pay-TV station to compete with three government-owned channels.

Lescure fashioned a channel that aired movies half the time while offering a mixture of live sports coverage, documentaries, and musical events such as Michael Jackson concerts. Now, Canal Plus airs everything from cartoons developed by the company's studios to the enormously popular Les Guignols. Says Pierre Dauzier, chief executive of Havas, which holds 24% of Canal Plus: "Lescure has an acute sensibility about the evolution of popular culture. He's atypical."

Lescure disdains hierarchy and motivates employees by his own enthusiasm for pop culture, especially things American. As a teenager, he sneaked into the U.S. military base in Paris to buy rock `n' roll records. Since then, he has assembled a vast collection of American kitsch, ranging from Porky Pig statues to rubber Apollo rockets and old radios.

NAP TIME. Lescure has had some jarring experiences in America, though. Early visits to Hollywood to develop film deals were humbling--studio bosses kept him waiting for hours, and one Warner Bros. Inc. executive fell asleep as Lescure was talking. "I never came back discouraged," insists Lescure, who has worked arduously to improve his English and spends half his vacation time in the U.S. He now hobnobs with such moguls as Walt Disney Co. Chairman Michael D. Eisner and TCI CEO John C. Malone. But the one he admires most is Murdoch. "He's a genius," says Lescure. "He was probably born global."

Lescure's media empire may be smaller than Murdoch's, but his vision is no less grand. He's betting that the ability to cater to national markets and languages will give Canal Plus an edge over U.S. broadcasters such as Turner Broadcasting System Inc., whose programming in Europe comes only in English. Already, Canal Plus produces Na Gape, a Polish talk show, Topspiel der Woche, a weekly German soccer game, and CCP, a Belgium business-news show.

Now, as U.S. media companies begin to realize that global audiences want more than Hollywood movies, MTV, and CNN, they too are scrambling for foreign allies. "It's a critical turning point," says one top U.S. media executive who is talking with Canal Plus. "Everyone is looking for a European partner." In October, Canal Plus inked a joint venture with National Geographic to market documentaries from both companies globally. It also has an alliance with Home Shopping Network Inc. "Canal Plus has an incredible network," says Kenneth Lemberger, executive vice-president at Sony Pictures Entertainment.

Lescure is also planning to raise the profile of Canal Plus in feature-film production to feed first to movie houses, then to its own channels and other television companies around the world. He hopes to announce an agreement in November with Sony Pictures Entertainment for a joint venture for film production based in London. Canal Plus already helps finance 90% of French films. In the future, Lescure aims to make fewer movies with bigger budgets of up to $25 million a pop.

The dream of making European films that bring in big box-office receipts will be the toughest to execute. "It's a brilliant idea. The problem is no one has succeeded in doing it," says Paribas' Carozzi. Canal Plus has already stumbled in films, seeking prominence in Hollywood by taking a 17% stake in Carolco Pictures Inc., the U.S. film production company. The link gave Canal Plus the chance to back big hits such as Basic Instinct and Terminator 2. But ineffective cost control pushed Carolco to the edge of bankruptcy and forced Canal Plus last year to take a $24 million write-off. Although Lescure will still back Hollywood productions, he says he will be much more selective. Subsidiary Canal Studio entirely financed last year's science-fiction hit Stargate, which grossed $200 million worldwide.

If Lescure's vision pans out, Canal Plus could create a vibrant television and film industry in Europe. That would certainly jolt the U.S. giants that assume they will dominate global media markets. However, Lescure must move fast. "Anyone who waits until the year 2000 is dead," he asserts. "The game will be won by then." Lescure is making sure his company is a clear contender.By Gail Edmondson in Paris, with Paula Dwyer in London and Ronald Grover in Los Angeles


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