After wrongly trying to call the bottom in October, after the false alarm on a return on advertising on public TV, negative feedback from buyers, and the CSA’s U-turn on LCI, we take an axe to our 2016 forecasts. With potential sequential deterioration in 2016, we downgrade to Reduce.
CSA overturning decision on LCI a disaster for 2016 forecasts
French regulatory authority, the CSA, announced after-close that it was reversing its initial decision to block TF1’s bid to convert 24-hour news channel, LCI, into a FTA channel. LCI’s operating losses (currently c. EUR7-8m) should now balloon by EUR20m in 2016 (this is the number TF1 is guiding for) as additional ad revenues from higher audience (vs. pay-TV) fail to compensate for EUR30m or so in lost pay-TV carriage revenues. In an already crowded market for FTA 24 hours news channels, led by NextRadio TV’s BFM and Canal Plus’ iTélé, we have low confidence that this activity will ever generate sufficient audience to break even (TF1 is targeting 2019, no. 2 iTélé loses money) and is more likely to go the way of TF1’s investments in a similarly overcrowded free press market (Metro).