On July 29, 2014 France's broadcast regulator (CSA) rejected applications from private national French TV channels TF1 (Bouygues group), M6 (RTL group) and Canal+ (Vivendi group) to convert three of their respective pay-television channels to free-to-air.
In January 2014, pursuant to Article 42-3 of the law of 30 September 1986 amended by the law of 15 November 2013 allowing the CSA to permit the migration of a pay regime to free or vice versa, TF1 applied to take its 24-hour news channel LCI from paid to free, while M6 wanted the same for its high-end cultural channel Paris Premiere. Canal+ also applied to move its documentary channel LCI from paid to free, while M6 wanted the same of its high-end cultural channel Paris Première. Canal + also applied to move its documentary channel Planète + from pay-TV to free-TV.
In taking its decision, the CSA, whose mission includes ensuring sufficient diversity of operators, examined such factors as the quality and diversity of programs in terms of their competitive and editorial effects, as well as their economic impact on all audiovisual sector players (notably the 25 existing free-TV channels), especially in terms of advertising revenue share.
As part of its investigations, the CSA, in April 2014, asked the French Competition Authority (FCA) to issue recommendations on the competitive impact on the advertising market of a possible switch to free-to-air television of LCI, Paris Première and Planète +, which would then become almost fully ad-supported.
In its Opinion dated June 18, 2014, the FCA pointed out that the simultaneous transition of three channels from pay-TV to free-to-air could weaken all free-to-air channels and “deepen the imbalance” between the historical groups (TF1, Canal +, M6) and the more recent free-TV independent groups that do not have as large a portfolio of channels or nearly as much advertising space.
With respect to LCI, the FCA considered that as result of a new free channel in addition to the four TF1-affiliated channels already present on free-TV (TF1, TMC, NT1, and HD1), the TF1 group would benefit from “a dominant position on the free-to-air television, with a broad offering which would alone satisfy a large majority of listeners.” According to the FCA, TF1 already concentrates 42% of ads (against 19.38% for M6), and five TF1-affiliated free channels would mean five times more outlets for advertisers, giving them the opportunity to propose package deals or volume discounts.
The FCA suggested that if LCI were to become free of charge, that LCI should ideally use a separate advertising network totally distinct from TF1, but concluded that this would be excessively burdensome. Rather, it recommended two measures, limited in time, to help TF1 avoid overly promoting its subsidiary:
- Ban cross promotions (where TF1 recommends to its viewers to watch LCI).
- Sales of advertising space coupled between the two channels.
Nevertheless, the FCA ultimately left it to the CSA to decide between “the undoubted benefits for viewers of the arrival of three strong brands in the free-to-air television field” and “the risks to the diversity of operators”.
The CSA thereafter made its decision in the light of two economic criteria and a qualitative assessment. First, the CSA noted that the present state of the advertising market is characterized by a sharp drop in advertising revenues for television, adding that no significant market recovery is expected in the short term and that the medium term outlook remains uncertain. According to the CSA, the arrival of one or more additional free channels could not now be sustained by a growth of the advertising market.
The second criterion considered was the competitive situation of the 25 current channels on the French free-to-air television market. The CSA considered that the financial situation of several free channels was still fragile, especially those that are not backed by a large group.
The third criterion was less economic and more qualitative. In terms of supply and consumer demand for television, the CSA believes that the arrival of one or more additional free channels in a landscape already composed of 25 channels constituting a wide range, would not result in a significant increase in television usage and would instead result in the audience shifting at the expense of existing free channels.
In respect of LCI, the CSA noted that the arrival of a third continuous free news channel exclusively financed by advertising could destabilize the existing two 24-hour free French news channels (BFM and iTélé), one of which only recently reached break-even and the other is operating at a deficit.
Similarly the CSA considered that Paris Première, if it became a free channel, would be likely to adversely affect the economic and financial viability of existing free channels with a similar format and audience.
Finally the CSA noted that the arrival of Planète + could affect the free documentary channel RMC Découverte launched in 2012, which has not yet reached its financial equilibrium.
In any event, the CSA has left the door partially open to revisiting the issue, highlighting that its ruling was based on the current state of the advertising market. “A more favourable evolution of the market could justify reopening the issue in the future”, it said at the end of its decision.
The ruling casts doubts over hundreds of jobs at LCI and Paris Premiere. Both TF1 and M6 have announced they did not see a viable future for these channels unless they switched to free-to-air. LCI, which was launched 20 years ago as France's first 24-hour news channel, is now trailing behind its free-to-air rivals iTélé, owned by Canal+, and BFM TV (in the NextRadioTV group).
Canal+, for its part, indicated that it had only applied for Planète+ to move to free-to-air because it feared that the switch of key channels such as LCI and Paris Premiere would have hurt the prospects of pay-TV as a whole.