After saving Quebec conventional channel TQS from the brink of financial disaster five years ago, Montreal’s Groupe V Média is attempting to do the same for two French music services.
The CRTC last week approved Groupe V’s purchase of MusiquePlus and MusiMax from Bell Media. For Bell, the sale marked the final divestiture of assets related to its 2012 purchase of Astral Media.
Groupe V also announced new minority partners: The Caisse de depot et placement du Québec, the Fonds de solidarité FTQ and Investissement Québec each assume a 15% stake in the company. They will provide a combined $30 million to relaunch the two services and expand the company’s operations.
Groupe V president and CEO Maxime Rémillard will retain a 55% stake in the company, with his share possibly increasing to 59% if certain financial objectives are achieved in 2015 and 2016.
The purchase price for the two services is $15.5 million, although the deal also contained a provision in which Bell Media agreed to purchase $1.5 million in advertising on the services, to be paid in advance at the close of the transaction.
Also included is a clause that Groupe V would pay Bell an earn-out for the 2014, 2015 and 2016 financial years if ad spend for the services achieved 80% of their 2013 level ($4.4 million for MusiquePlus and $2.3 million for MusiMax according to the CRTC’s most recent financial summaries).
Groupe V’s forecasts said the services would achieve that threshold if they operated under their current license conditions, and argued that earn-outs should not be included in the value of the transaction given their “uncertain” nature.
In its ruling, however, the CRTC said that ad sales are part of the normal course of business and not an item that can change the nature of the agreement. Adding in items such as assumed leases, the CRTC pegged the total value of the transaction at $22.9 million.
Groupe V did successfully lobby the CRTC to amend the conditions of license for the services in order to make them “more attractive” to their respective target audiences, however. While music will remain a core component of their programming, Groupe V had sought to reduce the amount of music-related programming on MusiquePlus from 90% to 75%, while adding complementary programming such as comedy, movies and entertainment, lifestyle and reality television. (MusiMax had no minimum programming requirement for music.)
In its submission, Group V reasoned that these moves would “cement” viewer loyalty and sense of belonging. However, the CRTC deemed a 75% music-related programming threshold “inappropriate” because of the genre protection afforded the services by their Category A status, instead instituting an 80% minimum threshold. “This level will help ensure the growth of the two services and the promotion of Canadian music artists,” said the Commission’s ruling.
MusiquePlus made $867,851 in pre-tax profit last year, but lost a combined $6.1 million between 2009 and 2012; MusiMax, meanwhile, has recorded a modest profit in four of the past five years, including $103,355 last year.
While the services’ Category A designation guarantees them must-carry status, the CRTC said in its decision that the channels’ accumulated debt is “considerable,” noting that Numeris ratings indicate they lost significant market share between 2008 and 2013.
The federal regulator also noted that “few buyers” had shown an interest in acquiring the services.
Several interveners who supported the sale noted that Groupe V successfully turned around struggling Quebec conventional channel TQS – subsequently relaunched as V in 2009 – after acquiring the channel in 2008.
The Commission also said that Groupe V’s experience in broadcasting independent productions on the service is an asset, especially since the two services are important in the promotion of Canadian artists.
The two French-language specialty services are Bell Media’s last two divestitures stemming from its 2011 purchase of Astral Media. Underscoring the dramatic upheaval occurring within the broadcast industry, the purchase price is considerably less than the $68 million Astral paid to purchase the remaining 50% of the two specialty services that it didn’t own in 2007.
Photo: Neverest performing at MusiquePlus
