France-based telecom operator Orange and French media company Vivendi have entered into exclusive negotiations over Vivendi’s offer to acquire 80 percent of video portal Dailymotion for €217 million (US $236 million). Orange will retain 20 percent of the company. Dailymotion is the second-largest video aggregation and distribution platform in the world, after YouTube, with over 2.5 billion videos viewed per month. The company had €64 million (US $70 million) in sales in 2014, which represents a 30 percent increase since 2012. If the deal goes through, Orange would use its 20 percent holding to accelerate Dailymotion’s international growth and to boost its content. Orange will use the proceeds of the transaction to finance its efforts in the digital ecosystem.
Vivendi’s interest in Dailymotion accords with its strategy of exiting the telecom sector and emphasizing entertainment products. In 2013, Vivendi sold Maroc Telecom to Dubai-based Etisalat. In March 2014 it announced that it would sell French mobile operator SFR to Altice/Numericable, in a deal that has not yet closed. Orange, on the other hand, is dramatically reducing its stake in Dailymotion. However, the company apparently believes that the video service can still be a success despite the fact that it has contracted since its inception in 2011 and has still not turned a profit. Orange CEO Stephane Richard said, “YouTube is 60 times bigger than Dailymotion. It is time to speed up, to continue investing, to find new markets, to anticipate new products and services.” Vivendi Chairman Vincent Bollore said the deal is “a first step in our ambition to create a large, global group that is focused on media and content.”
Whether Vivendi is the right partner to make that happen is uncertain, though. The French government put an end to an attempt by Hong Kong-based conglomerate PCCW to acquire 49 percent of Dailymotion, and its motivation appears to be nationalistic in nature. The government wants to keep Dailymotion French, but an Asian partner would be more likely to achieve a more widespread audience for the video service’s offerings. Orange’s stated ambition is to make Dailymotion a worldwide content distribution platform, but currently most of its users are in Europe. In 2013, the French government stopped a prospective sale of all or part of Dailymotion to Yahoo—a rival of Google, which owns YouTube—on the grounds that it is a U.S. company.