Annual report 2014

Group Profile |

Businesses

| Litigation | Risk Factors

Canal+ Group

2.1.6.

2014 Highlights

In January, Canal+ Group formed Canal OTT, a new entity responsible for

launching mobile and individual offers via the open Internet (

Over-The-

Top

) in France and internationally. Canal OTT is also responsible for the

development of the group’s multi-channel (MCN) network on the web.

In February, following approval from the French Competition

Authority, Canal+ Overseas completed its acquisition of a 51%

interest in Mediaserv.

In March, Canal+ Group acquired a majority interest in Studio Bagel,

the leading comedy channel network on YouTube in France.

In April, Canal+ Group renewed its contract with the Champions

League until 2018.

In July, Canal+ Group announced the launch of A+, a new, 100%

African channel intended to enrich the Canalsat package in Africa.

The launch was effective from October 24, 2014.

In September, Studiocanal and Svensk Filmindustri entered into a

strategic agreement to distribute Studiocanal films for the Nordic

market (Sweden, Norway, Denmark and Finland) and co-produce

films and series that capitalize on Nordic properties and talent, and

which are intended for the international market. Svensk Filmindustri

will distribute them in the Nordic market and Studiocanal in the

international market.

In October 2014, Studiocanal renewed its multi-year Subscription

Video-on-Demand (SVoD) agreement with Amazon in the United

Kingdom and Germany. Amazon will have exclusive rights to show

the new Studiocanal movies during the SVoD window for these two

countries, as well as hundreds of films from the catalog.

In the same month, Canal Overseas announced the signing of an

agreement to acquire a majority stake in Thema.

In November, Canal+ celebrated its 30th anniversary.

In the same month, myCanal, the Canal+ Group’s web and mobile

portal, launched the download-to-go function enabling viewing of

content without a connection.

Early in December, Canal+ Group launched Canalplay (a video-on-

demand service) on its satellite set-top boxes (Le Cube), followed by

deployment on the DVB boxes in mid-December.

In late December, Canalplay, the Canal+ Group’s streaming offer,

reached the 600,000 subscriber mark and its content became

available in download-to-go.

2.1.7.

Regulatory Environment

The overall regulatory environment of the Canal+ Group has been

discussed in previous Annual Reports and did not change significantly

in 2014.

The audiovisual communications industry in Europe is subject to

national laws and regulations. In France, their application is overseen by

regulatory authorities such as the CSA. Canal+ has a license to broadcast

the Canal+ channel in France via terrestrial networks as well as networks

that do not use frequencies assigned by the CSA, such as satellite, cable

and ADSL. In December 2000, this license was renewed for a period of

five years, and then extended for an additional five years by decision

of the CSA in March 2005, before the Canal+ channel’s authorization to

broadcast over terrestrial networks was extended for another ten years,

up to December 2020.

Through its subsidiary Canal+ France, Canal+ Group holds a controlling

interest in SECP SA, a company listed on Compartment B of Euronext

Paris, which holds the Canal+ broadcast license. A non-EU national

shareholder is not permitted to hold over 20% of a company that holds a

broadcast license.

A single company may hold, directly or indirectly, seven licenses for a

national terrestrial digital television broadcasting service. Canal+ Group

has four licenses for pay-TV channels (Canal+ HD, Canal+ Cinéma, Canal+

Sport and Planète+) and three for free channels (i>Télé, D8 and D17).

Under its license to broadcast in France, Canal+ Group must comply

with certain obligations in relation to the distribution of programs and

investments made in audiovisual and film production. For example, 60%

of the audiovisual works and films distributed by the group’s channels

subject to these obligations must be of European origin, and 40% must

be originally broadcast in French.

With respect to the obligations governing investments in audiovisual

production, the Canal+ channel must spend at least 3.6% of its total

net revenues for the previous year on expenditure on “heritage works”

(works of fiction, animation, creative documentaries, music videos and

filming or recreation of live performances). A portion of this expenditure

(representing at least 3.1% of net revenue) is allocated to the

development of independent production.

In the film sector, the channel must dedicate 12.5% of its annual revenue

to acquiring European films, including 9.5% for original French works.

This figure includes a success premium guaranteed at 0.5% of revenue.

It benefits French films that have sold over 500,000 tickets at the box

office or French and European diversity pre-purchases that will enjoy the

greatest success.

The D8 channel must invest 15% of its net annual revenue from the

previous year in the production of European audiovisual works or works

originally broadcast in French, of which at least 8.5% must be invested in

the production of “heritage works”.

Under its obligations to invest in film works, D8 must allocate at least

3.2% of its revenue from the previous year to European works and 2.5%

to original French works.

Canalplay (pay-per-view video-on-demand and video-on-demand by

subscription) is also subject to regulations governing audiovisual on-

demand media services. A November 2010 decree stipulated obligations

to invest in the production of audiovisual and film works and obligations

governing the offer and advertising. In addition there is a December 2011

CSA decision on the protection of young people and program ethics and

accessibility.

Pursuant to the law of June 2009, media scheduling (which requires

compliance with the distribution window for films after their release) has

been adjusted. Canal+ Group has implemented the agreement entered

into on July 6, 2009 and extended by the order of July 9, 2009, which

requires, among other things, the following window periods:

for films available via pay-per-view video-on-demand (primarily the

Canalplay VoD service) and on DVD: four months minimum after

theater release and three months for films which sold fewer than 200

tickets in their fourth week in theaters;

Annual Report 2014