Issue 5, 01 May 2002

Let's face it: Canal Plus, the pay-TV unit of Vivendi Universal, is not in good shape. It hasn't made a profit in four years and operating losses in the first quarter were Euro54m. New subscriptions are slowing and ARPU is flat. Canal Plus has become more like Canal Moins. Something had to be done.

Unfortunately, when VU CEO Jean-Marie Messier sacked Canal's boss and founding father Pierre Lescure, the creative minds at the channel were incensed and went on air to say so, some even calling for people to protest by canceling their subscriptions. Lescure says that he and then COO Denis Olivennes were told they had 24 months to turn the company around. A month later Olivennes had resigned and Lescure was fired by Messier. "How can we trust a guy who can't count up to 24?" demanded an irate Lescure. In Paris, the firing of Lescure ignited a cultural call to arms among those already worried that Messier was more interested in becoming a global media mogul than in French culture. The French regulator summoned Messier to confirm Canal's editorial independence and its continuing subsidy of French films, which is part of the channel's licence agreement. Messier confirmed both and defended his sacking of Lescure on business grounds.

He added that management under Lescure had shown "no ability to implement the necessary changes in a loyal manner". Messier was referring to an email sent by Olivennes and Lescure to all staff laying the blame for the financial crisis on Messier himself. Lescure's high-profile firing has put Messier's credibility under the spotlight. Has he given an Oscar-winning performance or did he fail the audition?

Messier changed a slow-growth water-and-waste company into a media powerhouse. His strategic vision, bringing together everything from the Universal studio to one of the big five music companies and delivering them to consumers on a variety of devices, was compelling. And despite the recent brouhaha in France, many equity analysts, who have watched Vivendi's share price tumble 40% since January, are still giving his vision the benefit of the doubt even as they have downgraded the stock.

However, his creation of this media behemoth has also fuelled an egotism that may have been crucial to building Vivendi Universal, but might lead to his undoing. The business rationale of putting Canal Plus on a firmer footing is indisputable, but VU is still a very French company. Messier is still subject to French regulation in terms of the Canal Plus business, and his plans to sell down his stake in Vivendi Environment has had to be suspended, in an effort to placate French politicians. But what is causing concern among V-U investors who see the pure-play media company promised by Messier delayed.

Perhaps the Canal Plus incident would have been minimal if the heart of Messier's company beat anywhere else but France. Messier, with his fancy New York apartment and increasingly global view has caused the French to run to the barricades. Where else but France would there be 5,000 people at a company's AGM, many heckling and some with banners proclaiming "Messier is a Universal idiot" and "Messier the mega-liar"? Rupert Murdoch is certainly not loved by all his fellow men even inside News Corp, but he never gets this kind of abuse.

The odd thing about the Messier mess is that it is largely self-inflicted. Other major media players are under huge pressure from the advertising slump, but VU gets a tiny percentage of its income this way and is actually in a better financial position than many of its rivals. So VU's stock price fall has been mostly about concern that Messier will be able to manage the very business vision that he has created. Meanwhile, the rumors of an imminent demise of VU's joint venture with Vodafone on its Vizzavi portal seems to be prying open Messier's grip on his grand plan. There is a way out of all this, but Messier needs to put the right managers in place at Canal Plus, where the spotlight is the most intense and he needs to focus on making the promised synergies work in all parts of the VU empire.

Finally, for a man with such style and intelligence, he needs to fight his next few battles with an epée rather than a broadsword. Just a little more finesse - surely a quality available to any high powered French executive - could have Messier, VU and Canal Plus making the right sort of headlines again.