Vivendi is known for headline-grabbing M&A, rarely for its organic growth. We think this is about to change: we see
Vivendi delivering 5% organic growth for the first time in a decade in 2017–18, shifting the story from value to growth
- with the potential for a re-rating.
Achieving this growth requires a fix for French pay-TV. It also needs growth from music streaming to more than compensate for the decline in the legacy formats.
Can this happen? The findings of our extensive consumer survey, STAMP, and new work on music industry trends suggest it is possible.
Sentiment on Vivendi is bearish, reflecting Canal’s struggles and confusing capital allocation. Yet investors will cheer if growth surprises. We turn Outperform.
What are the key themes? What new work have we done?
1) Will Streaming grow 25% or 35% in 2017–18?
The difference is 300bp+ on organic growth at Music and almost 200bp for the group. We think the answer is 35%. We have analysed the potential of subscription streaming, combining the results
of our unique STAMP survey (10k participants, c80% of the music market, notably to assess the take-up of Spotify and Apple Music) with a new tracking of streaming subs. We are bullish. We see Streaming growing c35% in 2017–18 and expect organic growth at Music to accelerate to 5–7% in 2017–19.
2) Can Canal’s French pay-TV be turned around? We expect signs of recovery in H1 17, which could be a major catalyst.
Through STAMP, we asked Canal subscribers how they feel about their subscriptions. It is early days, but we see reasons for the decline in subs to ease in 2017. At the same time, the broader Canal group will benefit from new wholesale offers
and from strong growth in Africa and Content. France will remain tough but Canal group should return to growth.