Vivendi SE
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Good day, and welcome to the Q3 2019 revenues conference call. This conference will be hosted by Mr. Arnaud de Puyfontaine, Chairman of the Management Board; and Mr. Hervé Philippe, a member of the Management Board and Chief Financial Officer. As a reminder, this call is being recorded.And now I'd like to turn the call over to Mr. Arnaud de Puyfontaine. Please go ahead. Your line is open, sir.
Welcome, everyone, and thank you for joining us today. Please make sure you read the forward-looking statement disclaimer as it concern an important legal matter. Before handing over to Hervé Philippe, I will comment briefly on our results and a few key initiatives. First off, I am delighted to report that Vivendi delivered another strong performance in the third quarter and over the first 9 months of 2019. The figures speaks for themselves. Compared to the same period in 2018, Vivendi's revenues increased by 16.7% for the third quarter of 2019, reaching nearly EUR 4 billion and by 14.6% for the first 9 months of 2019. This strong performance was mainly driven by continuing growth of Universal Music Group and by the contribution of Editis since its integration into Vivendi last February. Let me present some key strategic highlights from our main businesses during the third quarter. In music, Universal Music Group maintained its strong momentum plus 16% organically in revenue in Q3, thanks to the performance of all its activities: subscription and streaming, physical sales, publishing and merchandising. This result is even more remarkable given that UMG already delivered an outstanding performance in the third quarter last year. Universal's artists keep topping the charts. The massive success of Taylor Swift's latest album is particularly worth mentioning. More recently, the reissue of The Beatles' iconic Abbey Road album for its 50th anniversary has already returned it to the top of the U.K. album charts.Turning now to Canal+ Group. It has accelerated its dynamic international growth. Two exciting achievements at Canal have marked the last few weeks. Firstly, the acquisition of M7, one of the largest independent pay-TV companies in Europe, was closed in September. With this acquisition, Canal+ Group is now operating in 40 countries and has increased its global subscriber base to nearly 19 million. Secondly, in the same month, Canal Group announced a partnership with Netflix in movies and series. Since last Tuesday, Canal+ subscribers have access to the Netflix service through a single subscription. The partnership has reinforced Canal's position as a major aggregator of services in Europe and has provided its customers with a very compelling, all around content offer. This offer is available in France and should be expanded to other territories operated by Canal+ Group starting shortly in Poland.Canal+ Group is also pursuing its drive to transform its operations in France. As you know, in July, the group's management presented a voluntary redundancy plan to the employee representatives. Discussions are in progress. At the same time, we continue to invest both in technology and in content, with 10 Creation Originale for 2019/2020 versus 6 on average from -- for the previous seasons.In communication and advertising, Havas Group demonstrated resilience despite a challenging market environment. In line with its targeted acquisition strategy, Havas closed 2 transactions during the third quarter. The acquisition of 51% of BUZZMAN, one of the most creative independent agencies in France, renowned by -- for its buzz marketing campaigns, including the latest for Boursorama Banque starring Brad Pitt; and the acquisition of Langoor, a leading digital marketing agency based in India, the Middle East and Australia. This is the second acquisition by the Havas Group in India within a year after Think Design in May.This business overview would not be completed without mentioning Editis. I want to point out Editis' positive contribution to Vivendi's revenues, which amounted to EUR 470 million over an 8-month period. During the third quarter, Editis continued to enrich its catalog in literature and essays with the purchase of Éditions Seghers and L'Archipel as well as in graphic novels and comic books through a partnership with Jungle Publishing. Last but not least, the recent release of new books by best-selling authors such as Harlan Coben and Margaret Atwood are set to support growth in the literature segment. Last week, the Nobel Prize in Literature for 2018 was awarded for the Polish author Olga Tokarczuk whose famous novel, Primeval and Other Times, is published by Robert Laffont, one of Editis' publishing houses.Let me now give you a brief update on the share buyback program. Following the authorization given by the shareholders at Vivendi AGM in April, we are pursuing the rollout of our share buyback program to create more value for our shareholders. 1.3% of the share capital was repurchased between early August and mid-October. The current share buyback program runs until mid-November. It covers a maximum of 10% of the share capital at a maximum purchase price of EUR 25 per share.Let me now say a few words about the evolution of Universal Music Group's share capital. As you know, in early August 2019, Vivendi announced that it had entered into preliminary negotiations with Tencent for a strategic investment of 10% in UMG at an equity valuation of EUR 30 billion on a 100% basis. In addition, Tencent would have a 1-year call options to acquire an additional 10% at the same price and terms. The transaction is subject to confirmatory due diligence and the finalization of legal documentation, all of which should be completed in the coming weeks.As we stated in July 2018, the proceeds of the sale could be used for significant share repurchase program and bolt-on acquisitions. In parallel, Vivendi is pursuing the process of potentially selling an additional minority stake in UMG to other partners. Some have already expressed an interest in investing at a similar price level. To sum up, the third quarter of 2019 has confirmed Vivendi's excellent momentum. We are moving forward in building a unique media and entertainment company. I am sure that the remaining months of 2019 are going to be as eventful and exciting as the first 9. Thank you. And I will now hand over to Hervé Philippe.
Thank you very much, Arnaud, and good evening to all of you. It's my pleasure to present to you our revenues for the third quarter of 2019.Let's begin on Slide 9, with the impact of changes in currencies and the perimeter. So first table in this slide shows the impact of the exchange rates and perimeter changes on our growth rates. As you can see, the consolidation scope had a positive impact of 5.9 points on the first 9 months revenue. The main changes in the perimeter was the consolidation of Editis and Ingrooves. M7 has been consolidated since September 12. The ForEx had a positive impact of 1.8 on the first 9 months revenue, mainly at Universal Music's label. Regarding the change in currencies, the euro was down 5.8% against the U.S. dollar and 5.3% against the Japanese yen.Going to Slide 10, on the first 9 months revenue by business units. At the end of September, Vivendi's revenues amounted to over EUR 11.3 billion compared to EUR 9.9 billion, an increase of 14.6%, resulting from the growth of Universal Music Group's business as well as the consolidation of Editis since February. In organic terms, Vivendi's revenues increased by 6.9% compared to the first 9 months of 2018, mainly due to Universal Music's strong organic growth of 17.5%. Canal+ Group's revenues decreased slightly and Havas Group IFRS 15 revenues were flat.The contribution of Editis amounted to EUR 470 million for 8 months, plus 7.1% compared to the same 8-month period in 2018. Revenues from the other businesses amounted to EUR 311 million. They included Gameloft, Vivendi Village and New Initiatives.Going to Slide 11 on the detailed figures for the third quarter. In the third quarter, Vivendi's revenue increased by 7.2% compared to the third quarter of 2018 driven by Universal Music with 15.7% organic growth. Canal+ recorded minus 0.9% organically in Q3, which represented a slight improvement compared to the first half, thanks to the performance of its international activities. Havas recorded a flat organic growth in its IFRS 15 revenues during the third quarter 2019 amid challenging market environment for agencies. The Q3 revenue contribution from Editis reached EUR 210 million. Overall, the group's organic growth remained very strong despite the comparison basis in Q3 last year from the total revenues for Q3 2019 reached almost EUR 4 billion.Now let's look deeper into the details for each business unit performance, starting with Universal Music on Slide 13. Yet again, Universal Music's revenues experienced high level of organic growth, plus 17.5% over the first 9 months of 2019, surpassing EUR 5 billion at the end of September. As you can see on the left hand of the slide, this growth was generated by almost all activities. Subscription and streaming grew plus 23.4%, sustained mainly by the releases by Billie Eilish, Ariana Grande, Taylor Swift, Post Malone and the A Star is Born original soundtrack. Physical sales were up almost 15% with the contribution of Taylor Swift and the Japanese act, King & Prince. Physical sales were also boosted by the 50th anniversary edition of The Beatles' album, Abbey Road, at the end of September.Publishing achieved 9.7% growth, driven by streaming and subscription as well as higher performance revenues. Merchandising increased more than 82%, thanks to higher touring activities and direct-to-consumer sales.Meanwhile, the trend in downloads remained unchanged, with a 14% decrease year-on-year. This 17.5% organic growth performance for the first 9 months is all the more impressive, given the increasing growth number involved as shown in the right-hand side of the slide and a very high comparison basis that is only getting higher. As a reminder, last year in Q3, Universal Music already had recorded a strong organic growth of 13.5%, with a very robust plus 38.6% increase in streaming and subscription.Going to Slide 14, when you can see Universal Music Group's revenue figures for the third quarter and the first 9 months. In the third quarter, recorded music revenues grew by 13.3% organically, thanks to the strong performance in subscription and streaming revenues with almost 20% organic growth and despite, again, the very high comparison basis. Physical sales were also quite robust, jumping 14.8%. This performance was outside of the normal trend and was driven by the releases by Taylor Swift, The Beatles and the Japanese bands. But the fact is that Universal Music experience in 2019 of growth each month in physical in comparison to the same period of last year. Globally, Universal Music Group's revenue grew by 15.7% organically in Q3 2019, and 17.5% in the 9 months, very good performance indeed.Moving to Canal+ Group on Slide 16. Group Canal's revenues amounted to EUR 3.8 billion for the first 9 months of 2019 for a total subscriber base of 18.9 billion. Note that we have reviewed the KPIs methodology calculation of the subscriber base following the M7 integration. International operations continue to be very dynamic, and revenues increased by 4.3% organically, thanks to the growth in the subscriber base. Excluding M7, the international subscriber base continued to post sustained growth with plus 797,000 new subscribers, mainly due to the strong sales in Africa, with the Cannes effect experience between mid-June and mid-July. At the end of September, we also included, for the first time, the M7 subscribers of 2.1 million.For mainland France, at the end of September, the subscriber portfolio stood at 8.4 million, and the revenue for the first 9 months amounted to almost EUR 2.3 billion. This summer and in September, Canal+ experienced better commercial trends linked to its enriched sports package with the return of the English Premier League, a new premium series on the Cinema Series batch. As a result, the number of subscribers to the Canal+ channel, which is the nucleus of our business, grew by an additional 99,000 year-on-year, despite a tough comparison landscape.Let's turn to Slide 17 and focus on the M7 acquisition. M7 is operating in Benelux and in Central Europe. It aggregates and distributes local and international channels via satellite and OTT platforms. The acquisition was completed on September 12 and contributed up to EUR 20 million to Canal+ international revenues in September. On an annual basis, M7 should generate more than EUR 400 million and be accretive to Canal+ Group and Vivendi. This important transaction allows Canal+ Group to accelerate its international growth and also to strengthen its distribution capacity in order to leverage content originating from its library and its numerous production operations in Europe.Going to Slide 19 and the Havas Group's performance. At the end of September 2019, Havas net revenues increased by 2.9%. The organic growth was minus 0.6%. By region, in North America, organic growth remained satisfactory, thanks in particular to the good performance of the media activities at Havas Media, of health and wellness communication at Havas Health & You, and the cultural expertise provided in collaboration with the Vivendi Group called The Annex. In Europe, the United Kingdom, Spain and Portugal reported strong performances, while the other countries saw business contract.Latin America continued to enjoy a positive growth driven primarily by Mexico. Business in Asia-Pacific declined in the third quarter. You will find in appendices all the detailed figure for the Q3 net revenues. But Havas has strong pillars for the following reason: its creative excellence; its media expertise; its health and wellness division, which is doing great; and very well-balanced sector breakdown. Regarding this breakdown, the breakdown of net revenue growth, ForEx had a positive impact of 2.3% mainly due to the U.S. dollar and M&S impact was 1.3%, thanks to the Baltic and Republica acquired in 2018.On Slide 20, let's do a focus on Havas M&A activities. The M&A strategy remains unchanged. Each year, Havas makes between 5 and 10 targeted bolt-on acquisition, and that can either expand its geographical network or strengthen its expertise in specific fields. Havas takes a value-focused approach to M&A to secure future growth. In line with this strategy, Havas closed 2 significant deals during the third quarter: a 51% stake in BUZZMAN, the French agency acclaimed for its creative and its buzz ads. This move further strengthen Havas' creative leadership in France. BUZZMAN team of 140 talents works with leading brands such as L'Oréal, IKEA, Burger King, Boursorama, OREO, easyJet, Huawei, and many other more.Havas also pursued its expansion in India with the acquisition of Langoor, which follows the acquisition of Think Design in Q2. With 170 experts based in India, the Middle East and Australia, Langoor is a full-service digital agency serving a broad array of clients ranging from multinational to local firms. Havas continues to generate sound financial results, thanks to its deployment of unique creative ecosystem at the nexus of all the culture-driven industries, with a young client portfolio on its agility in response to constant change in the industry.Going to Slide 22 on Editis. Vivendi has fully consolidated Editis since February 1 this year. Editis' contribution to Vivendi's revenue amounted to EUR 470 million for 8 months, up 7.1% compared to 2018 on a pro forma basis. In Q3 2019, Editis revenues increased by 15.3%, reaching over EUR 200 million. This satisfying performance was linked to the high school curriculum reform that boosted the sales of the leading houses Nathan and Bordas of the education and reference segment, plus 17.3% since February. The literature segment also contributed to this growth, thanks to the new books released in autumn. This good momentum should continue over Q4, thanks to holiday sales.On Slide 23, which is the last slide of this presentation. Let's have a look to the performance of the other businesses. Gameloft's revenues were down 14.2% organically due to the structural decline of the distribution business, but more specifically for this year, the postponement of several games to be launched later in Q4 or in 2020. New Initiatives, which includes Dailymotion and Group Vivendi Africa, increased by 8%. And finally, Vivendi Village released strong performance and grew by more than 50%, driven by the increase of live and festival activities as well as solid ticketing sales. Thank you very much. This concludes our Q3 revenue presentation. We are now ready to take your question.
[Operator Instructions] We'll take our first question from Omar Sheikh with Morgan Stanley.
I've got a couple, if I could. Maybe I'll start with Arnaud. On your update on the UMG process, you mentioned that there are other partners that have expressed some interest. I wonder if you could just maybe give us some color on how many partners you're talking about. Is it one or 2? Or is it more than 5, for example? And also, if you could give us some color on whether they are strategic or financial investors. That's the first question.And then the second is on the uses of proceeds or potential use of proceeds from any sale. I thought it was interesting that you put up a slide on Havas' M&A strategy for the first time. So maybe I could ask, first of all, if you could just confirm that you plan to allocate 50% of the net proceeds after-tax for M&A and 50% for share buybacks. And whether or not you would add ad agencies to the list of areas of your business in which perhaps you might wish to invest?
Omar, so on the first question, I can just say that we had a few confirmation of sign of interest of different kind. As we said, we are absolutely in line with the process that we described previously, and we kicked off the process with our adviser early September and they're working. As regard to numbers or more details on the profile of the interests that have been confirmed, I'm not going to give any more color, I'm afraid. On your second question as regard to the proceeds, we said that we would use the majority of the proceeds for share buyback. And as regard to potential allocation in M&A, that will be decided when we get the proceeds, number one. And when we're going to be getting the opportunity that would be then, in terms of time frame, available to us. So I repeat myself, it's significant share buyback program. That's what we said and will be happening.As regard to the scope of potential allocation of resources on bolt-on acquisition, may I just repeat that the allocation will be done on bolt-on acquisition that are going to make sense in terms of financial discipline. There are different areas of interest. And as you have seen in the last period, because the second part of your question was part of advertising agency, you have seen that we have some initiatives like the 51% on BUZZMAN. You have seen that we did an acquisition in India. So as regard to the project of building an integrated industry or group through Vivendi and within Havas in the group, we are satisfied with the progress we made as regard to the strategic vision and its implementation. And we will see as regard to the opportunity in due time if there are opportunities to be able to build up the good momentum that we are creating on this specific market.
I wonder if I could just maybe have one follow-up. On the other potential partners, again, would you -- I guess the question is, would you be satisfied if at the end of the process, you only had one additional investor in Tencent and no others? Do you think that would be a satisfactory outcome to the process?
I think that as regard to the process that it is, we are very happy to have this momentum with Tencent. We are happy about the valuation. We are happy about the opportunity and the profile of Tencent as a strategic partner. So if it were to remain as such, we will be happy. But then maybe again, other interest to be very complementary. So Omar, let's say that I'm a happy CEO as regard to the different options available to us. Thank you.
We'll take our next question from Richard Eary with UBS.And we'll move forward. Our next question is from William Packer with Exane BNP Paribas.
So 3 for me, please. Firstly, you're cycling through some tough comps in the streaming side of music business. I imagine the subscription side of that business is a bit less lumpy. Could you give us some kind of insight into its performance in Q3? Is it growing faster perhaps? Or some kind of number?Secondly, another outstanding performance in physical, which is great. On the other hand, what are the implications to next year in terms of growth for margin? Should we expect a kind of normalization to historic trends in physical, or is it the new base from which we can forecast the ongoing decline? And then perhaps finally, could you update us on the progress of your conversations with your platform partners? Are things progressing well? Anything that we should be aware of?
William, I will hand over the very easy question you mentioned on the first part to Hervé. While I'm going to concentrate on the second part of your question. I can just report that as it’s always happened in the past, there is -- there are constructive discussion with our strategic partners. And as I mentioned in the past, there is a common interest in getting the kind of the right flying speed to be able to benefit from the recovery of the market in the industry and to be able to create the right condition to grow even further. So nothing specific to report at this stage, but things are going according to plan. On the first part, in margins and what's going to be the industry in the foreseeable future? Hervé will take it.
No. No. It's a question on physical, but I will first answer the question on the streaming and subscription trend in the third quarter. Just to highlight that last year, we had a very, very high rate of growth. In this quarter, plus 38.6% in streaming and subscription in Q3 2018. It was -- this was a very high performance. So clearly, this year, we have done a very good performance. But the comparison basis was very tough to -- for this specific quarter, I would say. And this is also simple mathematics. You have an increased base of subscriptions, so it's logical that you could have some slowdown in the rate of growth, but it's still very high rate of growth, I can say.For the physical and to answer you on your trend in physical, what is surprising for us is that the trend, normally, should be to have a decline in physical. But the truth is that this year, we have seen an increase in physical sales in each quarter of the year. So this is thanks to very good releases, which have been done in those different quarter. And we'll see what will be the future. But normally, the trend in physical should be to have a decline in this part of our business. We are very happy when we have very good surprises, I would say, but we believe that the trend is to go to the decline.
Just one quick follow-up question. One piece of news that's quite notable out there is that ByteDance have guided, I think, for EUR 15 billion of revenue in 2019, and music is an absolutely core part of their business model. Should we expect that very strong growth of ByteDance and TikTok to flow through to the music industry in due course?
I'm sorry, I cannot comment on that. I have not seen those figures. So I cannot comment.
We'll take our next question from Adrien de Saint Hilaire with Bank of America.
Just a few questions, please. So first of all, coming back on the Tencent announcement. Can you give us a bit more color around when you expect the full closing, if you're still confident that the deal won't require any U.S. approval from the U.S. administration? And also importantly, what benefits do you expect for the future years in terms of your revenue growth in China and in Asia? That will be the first question.Second question, Arnaud, you mentioned you would return the majority of the proceeds in the forms of buyback. I'm just curious if that buyback would still be limited to EUR 25? Or if you will wait for the AGM to vote maybe on a different threshold before you do the buyback? And then on the point about new partners, I'm just curious what do you expect the new partners to bring, especially if it's at the same price than Tencent is offering?
As regard to the time frame, we can expect to be able to get greater news by the end of the year. As regard to the legal environment, we will file the transaction as soon as it is agreed. And we will, in the different jurisdiction, file what we will have to do in terms of compliances. But at this stage, we don't see problems. Shall I remind you that we are selling a minority and not the control of the operation. But obviously, as soon as we get the completion of the agreement, we will proceed with all the requirements.As regard to potential other partner, as we said, we want to be able to create combination that are going to help us through getting the right momentum in the growth profile of the industry, and what I would so-call the reinvention of an industry. As we have seen over the past quarters, since we started the journey in 2014, we have seen all the great job that has been done by the Universal Music Group under the leadership of Sir Lucian Grainge. And what we can see the innovation, the quality of the artists, the quality of the A&R team, the quality of the way we have to distribute our music in different shape or forms, is providing us with many opportunities, which is a way for me to explain that a partner like Tencent, for instance, will help us through the great opportunity to be able to create value in China, first and foremost. I'm not going to develop all the different details. That will be done in due time. But what we are expecting is to get a strategic partner or partners to be able to accelerate the momentum that we can benefit from over the past period.And as regard to the condition of the share buyback, while this is a discussion and this is a recommendation that the Management Board will make at -- for the Supervisory Board because this is a decision to be taken and recommended to the AGM. You want to add something, Hervé?
The next AGM is scheduled at mid-April next year. We'll see at the time if we put a different result in terms of share buyback. And for the signing of potential deal, we have decided that it will be in the coming weeks. So we'll be much more precise at the time, on the different timing and the different aspect of this deal.
And just to clarify a bit what you were saying about the Canal+ trends. I mean, we saw a number of headlines around cost-cutting in France. Today, dropping the Olympic Games rights, splitting the English Premier League rights. I mean, do you expect trends in France to deteriorate at Canal+ because of these or as a response to the cost-cutting measures? Or are the cost-cutting measures taken to anticipate any deterioration of the French business?
Adrien, if you allow me, I'm a little bit surprised by your question because the main purpose is exactly the opposite. What we have done since we started the overall and the reinvention of the Canal+ operation in France in 2016 was to prepare the company to be able to compete in a more competitive environment. And what we have announced and what we have implemented is just to be able to prepare the company to be nimble and to get the kind of the right efficiency approach in the way to operate business to be able to maintain the momentum that we have created.And if you see in the presentation which has been made, subscribers to the Canal+ channel in mainland France increased by 99,000 year-on-year. So what I can say is that yes, there is a competitive environment. Yes, there is a constant commitment to be able to get the right size to be able to compete. Things are extraordinarily competitive, so if there is something that we need to be prevented from is any kind of complacency, and that's the reason why we work hard to be able to create the sustainable profile for the company.Groupe Canal+, obviously, international, obviously, but focusing on the capacity to ride through this OTT environment, which is the competitive set in which we have operate. And that's the reason why we keep on maintaining the demanding approach we want to have as regard to the cost structure of our operation in France.
We'll take our next question from Richard Eary with UBS.
Apologies for earlier. I sort of -- I ended up canceling the line saying -- so taking up a new, so apologies. Just a couple of questions. Just with regard to Canal+ profitability, how do we think about M7 in terms of whether that is accretive to the profitability? And what we should think about as we go into 2020 yet next year? Obviously, you've outlined EUR 400 million of revenues, but you haven't talked about the profitability of that asset or any synergy benefits coming out of the deal. So that's the first thing.Second thing is just going back in terms of, obviously, I think Will's question about physical. I don't know whether you can give us any feel in terms of how we should shape that for Q4. Clearly, there's a longer-term trend of our decline, but should we still expect physical, given their upcoming release slate and the performance year-to-date, to be positive?And then just lastly, I apologize if you said something about the license deals with the platforms such as Spotify, whether we'd actually -- whereabouts are we on that process?
To answer the first question, this is Hervé speaking, on Canal+ and M7. We have said that this will be accretive for both Canal+ and Vivendi. Thanks to the profitability of this business, which will appear when we release our figures with EBITA later for this year. And for next year, clearly, we have synergies with all the group, especially in terms of programs which can be put in those different countries and the possibility to buy together more program.On the physical trend for the Q4, the general idea is that we have already a very good Q4 last year in physical. Thanks to the different soundtracks which have been launched last year, A Star is Born, Bohemian Rhapsody, in particular. This year, we'll see what will be Q4. We have also good releases and especially The Abbey Road 50th anniversary for The Beatles, which is performing well. So I cannot -- I'm sorry, but I cannot give you any trend for Q4 specifically in physical. And for the license deals for the platform, we do not specifically comment on that, as we have already said.
But the only thing is we never disclose the terms of deals including when they expire. We don't speculate on any deal terms, but the only thing we can say that we are confident in our position as the world's leading music company. And we do believe in the continued growth and success of both Spotify and the overall streaming market, which has now a number of strong companies. So at the end of the day, it's not about UMG versus Spotify or the labels versus the platforms but more about working together, as I said previously, to accelerate growth in the market. And it is based on ongoing discussion and negotiation with our different partners.
Can I ask just 2 follow-up questions just for going back to M7? What's the underlying profit margin for M7?
Well, we have not disclosed it.
Okay. So when you say it's accretive, what are the inputs that we need to use to define whether it's accretive to get to the margin number?
Well, I can just say to give some color that M7 is really profitable, very profitable, much more than the sector standards and also than Canal+. So that's why we say it's accretive.
Okay. The second follow-up question is just going back to the streaming numbers. If we were to adjust for the deals that were put in place with Tencent, Facebook, YouTube last year and you strip that out, so we actually just look at the underlying subscription numbers coming through, could you give us a feel in terms of what the subscription numbers are doing rather than the advertising numbers in that streaming number?
No, I'm sorry. I have not the figures yet. I just can say that last year, we had obviously the impact of the new Facebook deals and YouTube, which impacted positively the figures of last year. But we -- those deals are continuing.
We'll take our next question from Lisa Yang with Goldman Sachs.
I have a few questions as well. So firstly on Canal+, it looks like your French TV organic growth improved from minus 4%, minus 5% in H1 to about minus 2% for Q3 based on the 9 months numbers. So just wondering like what's been really driving that. Do you see that continuing to October? And on Canal+ as well, is it possible to get an update on the progress of the reorganization plan, how much restructuring costs and savings you expect in the second half?Secondly, on UMG, could you confirm whether UMG has gained or lost share in Q3 in subscription and streaming? How are you thinking about Q4? And the last question is about your release schedule in Q4. I thought UMG France talked about the release of Rihanna and Drake before the end of the year, which obviously would be substantial releases for UMG but I can't see them on Page 27. So could you confirm whether the releases of these albums have been postponed into next year?
I take your last question and we're not going to comment and to be very specific on Rihanna and Drake. On Canal, Hervé?
Well, we have said that the trend was better in the French TV operation, both in recruiting and cancellations, mainly thanks to the better offer we have in sports. So this is something which we have seen during the summer coming. So it will -- it continues now but I cannot give more precise figures on that.On the restructuring at Canal+, I can say that we have launched a program of restructuring 2 years ago with a EUR 350 million savings plan, which is well done, I would say. And we have announced a plan to have voluntary people leaving the group in the coming months. But this is under discussions with the people, with the trade unions. So we're not in a position to give any precision on the financial potential impact on that. It is possible that we will have in the figures for this year some restructuring costs, but I cannot give you any precision on that.
I would just add to Hervé's plan that it's important to precise that our voluntary redundancy plan, which was announced in July 2019, is not due to the loss of the Ligue 1 football rights as from mid-2020. The plan is part of the global ongoing willingness to transform the company French activities and that we did launch since 2015. As regard to what is going to be the offer, shall I remind you that Canal+ has a very strong sport offer. It's now the broadcaster of the Premier League, the English Premier League. It's the partner of the French rugby with the Top 14, as the Formula 1 management, the Moto Grand Prix, the golf, just to name a few. As regard to the French Ligue 1, as mentioned by Maxime Saada in different occasions, jury is not out. What we know is that there is a new owner. There are new owners for those rights. We know and we made it very clear that the rights as regard to this French Premier League, Ligue 1, were way too expensive and that we didn't want to compete on this because that was not making, in our view, any economic sense. But we are watching closely the different situation and the evolution. So jury is out and time will tell. Thank you.
And the market share of UMG in Q3? Have you won and lost market share?
Well, it's very difficult to know. I have not all figures for all the competitors. But it could be logical that from 1 quarter to the other, sometimes we win market share. Sometimes we can lose some market share that you saw. That's why for 1 single quarter, it's very difficult to know that. I know that in general speaking, we have won market share in the past quarters, which -- it could be the case one time to lose a little bit market share.
Can I follow up on the comments you made on Canal+? I mean I understand you...
No. No, I'm sorry. I'm sorry, Lisa. We can't take a different question. It's 1 question because of time, so we'll take the question outside the call with our team. Thank you, Lisa.
We'll take our next question from Matthew Walker with Crédit Suisse.
Just 2 questions, please. The first is on earlier, it was announced that Tencent had an investigation into its relationships with record labels. From your commentary, you don't feel like that is going to be a barrier to the process you're putting in place for the sale of 10% or possibly another 10% of UMG, if you could just confirm that.The second question is on Canal+. Could you give us a retail sub number so that we can compare it with the 4.583 number in H1 of this year? I'm just trying to get a sense of that. That'll be helpful.
Matthew, I don't recall having made any statement of the -- on the subject you are raising. I made a statement about the U.S. legal environment as regard to the transaction. But as regard to the point you're mentioning, which is the ongoing investigation by Chinese authorities on the Tencent Music exclusive ownership, well, I can't speak for Tencent's intention. But I will say that it was widely known in the industry and that the Chinese government was unlikely to allow the exclusive deals against next time around. So this is a situation that is dealt with and on which I will not make any comments. But I see that as a separate matter from the transaction that we are currently discussing. Hervé?
I cannot answer the question on Canal+. I have not understood the question, to be very frank. So if you can repeat it?
Sure. It's just in mainland, you normally reveal a subscriber number for retail subscribers in mainland France. And I believe -- I could be getting it wrong but I believe in the first half of 2019, that was 4.583 million. I'm just looking for a comparable number for the 9 months just so I can judge how the subscriber profile on the retail subscribers in mainland France has evolved.
Well, in fact, maybe the figures are not completely comparable because we have changed the methodology of the subscriber base for different reasons following the acquisition of M7. And we have increased, in fact, the subscriber base globally speaking. But it reflects better the kind of different subscribers we have, especially at the international level, to take in account some bundles and wholesale partnership. And we aligned the French subscriber base methodology with that.And also, in France, now we include the subscriber for -- to [ tender ] offers, which were not included in the past. So that's why we have some differences in the subscriber base. Globally speaking, I would say the difference is roughly 900,000 for all the figures, the 2/3 being at international level and 1/3 being in France.
We'll take our next question from Julien Roch with Barclays.
My first question is for Hervé. What is the frequency at which you get streaming revenue from Universal? Do you get it on a weekly basis or on a monthly basis?
On a monthly basis.
On a monthly basis, okay. And my second question is for Arnaud. Can you remind us why you want to sell more music after the Tencent transaction? One of the reasons to sell a stake in music was to get an external valuation demonstrating that the market was undervaluing music. You've done that, but why sell more? Music is your best asset by far.And so are you going to get better return with the cash proceeds? Because for instance, if you do a buyback, you're exchanging 100% of music, again, as Vivendi, which is 70% music and 30% something else which is less attractive, not necessarily bad but less attractive than music. So if you could retell us the rationale for selling more of music after the Tencent deal?
Julien, I don't recall but you will certainly help me. I don't recall having said that I wanted or we wanted to sell more. We started the process in selling. You do remember that we went entering into a process to sell up to 50%. Then after the Board, we confirmed that in July and we had this announcement in August 2019 with Tencent. While we announced this move from Tencent and the opening of a transaction, we said that we would decide on this discussion, follow through the process that we said that we did do in September with our advisers.At the same time, I also made it very clear that we had other sign of interests. So the other sign of interest had been confirmed. We are going to process then. And what's going to be the outcome will be based on the recommendation and the work, which is currently happening. We will make a recommendation to the Supervisory Board and we'll see. But -- so the situation, as we speak, is to be aligned with the process as we said it would be happening and we are walking the talk.I take your point as regard to the rationale behind extending from the 10%, potentially 20%, to another partner. That would be possible due to the initial willingness to open up to 50% of the capital. It will depend on many criteria, which is much too soon to be addressed during that call. But if it were to be the case, that would be to provide you with sufficient explanation to convince you that it's been the right call. But it's not a willingness. It's a process that we are following through according to what has been disclosed since we did kick off that project.
And if I -- my follow-on on the same question. If the interested party was someone that was just bringing money and no strategic merits to Universal like Tencent does in China, what would be your personal view? Would you recommend that you sell an extra X percent of Universal? Or because they just bring money, you shouldn't sell an extra X percent of Universal? What's your view on this?
As you know, Julien, we say in French, with this, we could put Paris within a bottle. So I don't -- I will give my recommendation and the exclusivity of my recommendation, the recommendation of the Management Board to our Supervisory Board. The only thing I can say is the only rationale behind being able to extend and to create the kind of a gathering of partner for Universal Music Group will be only based on the capacity to accelerate the growth of the business. But I can't comment any more at this stage.
We'll take our next question from Conor O'Shea with Kepler Cheuvreux.
First question on Universal. Hervé, could you tell us if there were any exceptional items, settlements or other in Q3 and remind us if there were any in Q4 last year? And also just on the boost to growth, obviously, the physical but also merchandising. A small item but at the level of growth that they're generating makes a significant contribution to the overall, I guess, link to touring. What should we expect? Should we expect another spectacular quarter in the fourth quarter, given what's in the pipeline of tours and so on?Second question on Havas. We've seen a very weak performance in Europe in the third quarter, I think minus 5% organic. If I'm right, I think you said that U.K. was quite good. So where is the weakness? Is it in France? Is it client-specific? Or is that a market effect, do you think?And then the last question on Editis. Do you expect the strong growth in the third quarter to have a significant impact on margins in the second half of the year once they're announced? Is there a good operating leverage from that high growth?
I will answer on music and we have no exceptionals in the Q3, absolutely no exceptional. It was -- that's the case in the Q4 last year. I don't remember any specific exceptional in Q4.
Yes, we had.
We had in publishing last year but not in Q4. And to come to the boost in merchandising, which is interesting. In reality, this business is very dependent from the artist tours and some promotion. And there were some very good touring in many new avenues this year. And also in direct-to-consumer area, it has very well worked in this third quarter. Frankly, it depends on those activities, on those programs, so I cannot give any guidance on the Q4 on this specific part of the business.For the -- to answer the Havas, the figures were very -- in different countries in Europe, I would say, especially in Germany, Spain, Italy, we have seen some deceleration due to the policy of big clients to build international hubs to a more global level, I would say, which is one of the reason for this quarter. But we are very -- in fact, for Havas, we are very confident in the profitability of Havas and the possibility to have good level of margins before restructuring charges in 2019 and after. So we are confident on the level of margins, I will say.
As regard to the Editis question, it's worth mentioning that this is a business which has a strong seasonality, which is mainly based on relatively weak H1 and a strong H2. But this year is a little bit peculiar due to the education reform, which will have an impact in terms of profile of the second half because we invested in the first half in preparing for the reform of the college and high school, and we should be benefiting from the impact of the numbers in the terms of the second half.But as in -- and we're talking about the impact of education within the profile of the business. But as it's the case in the music, we've got seasonality obviously, but quarter-on-quarter, we are also dependent on the releases. And then part of the agenda at Editis is to be able to get the very best offer and the publishers to be able to follow through the amazing story, which is the Universal Music Group story as regards to A&R and the quality of our artists. And so the plan is to do the same thing in the publishing industry with Editis, but this is something that will be built in the midterm.
We'll take our next question from Laurie Davison with Deutsche Bank.
It's Laurie here from Deutsche. First question just on Mediapro and the Ligue 1 rights from mid-2020. Have you had any discussions with Mediapro on wholesaling? And is there any prospect of a wholesale deal? Or should we be expecting that you're going to continue without the loss of the Ligue 1 rights from mid-2020? That's the first question.The second is just to wrap up the overall restructuring costs versus cost benefit for Canal+. If I'm looking at 2019 EBITA consensus, it's currently at EUR 402 million for this year, Canal+ EBITA. And to next year, we're looking at just over that, so it's EUR 461 million. Are you happy with that given the net balance of restructuring costs and savings?
As regard to your first question, I mean we won't comment on the potential outcome of discussions. I think that many people are discussing among themselves. But yet, as mentioned by the team at Canal, we are confident that there will be some Ligue 1 match on Canal+ channel after 2020 because Canal+ is renowned to be the best for distribution. We've got unique broadcasting football capabilities in France, and we are the first distributor of beIN Sports channel in France. So we'll see what is going to be the outcome, and I can't dwell in -- on any potential outcome at this stage.The only thing that I would say is Canal will be taking a wise and well-thought-through decision under condition that are not going to jeopardize the great job that has been done by the team. More needs to be done to be able to create a sustainable business model. This is the key priority for this team on the decision process on all the issues, all the topics, the Ligue 1 in France being one of them.
To give my ideas on the EBITA level at Canal+, I cannot give you any guidance on that. We have not said anything on that and I cannot give my personal comments on the consensus. Obviously, we will do a restructuring. There will be some costs associated to those restructuring. And if we do restructuring, it's because we hope that this will lead to a better organization, which will improve the profitability of Canal+ in the future. That's all I can say.
[Operator Instructions] We'll take our next question from Tom Singlehurst with Citi.
Tom here from Citigroup. A couple of questions, if it's okay. First one, just coming back on physical. I know last year, The Beatles were the top 4 selling act for Universal as a whole. I'm just trying to get a sense of how much of the physical growth is coming from, I suppose, what one might describe sort of as back catalog, sort of older music. I sort of appreciate that you're going to be re-releasing sort of new -- newly remastered versions of old music. But how much of it is sort of music that dates from the '60s, '70s and '80s relative to sort of front-list content that's genuinely new? That was the first question on physical trend.Second one is on market share -- not this time, market share in streaming and subscriptions. Just picking up on some interesting data from Sweden a couple of weeks back that indicated that in Sweden at least, UMG and the other major labels are losing share to independents. I'm just trying to -- given Sweden has been so far ahead of the curve than other markets, I'm just trying to work out whether there are some things Sweden-specific that you think is driving this, and then linked to that, whether the strength of Spotify in that market is just an enabler or whether streaming services are sort of encouraging that share shift.
Well, for the -- to answer your question on the physical trend on the back catalog, I have not specific figures on that. So it's very difficult to answer precisely to your question. What I can only say is that very often, you can -- with physical, you can have some anniversaries or you can re-release all the records. And there's always the possibility to do that with some specific dates when you have anniversaries.On the streaming and subscription market share, I would say it's very difficult to comment on Sweden. I don't know a specific question on Sweden. We can say that we do not set specific market share targets. It depends from 1 quarter, 1 month to the other for the different releases. But we can say that generally speaking, Universal Music is very well positioned especially in the urban music, which is a very good way to have good market share on the streaming side of the business. And frankly, there was some past big success in the urban music at Universal Music.
And ladies and gentlemen, this does conclude today's question-and-answer session. I would like to turn it back to your presenters for any additional or closing remarks.
Well, thank you very much for your attendance. Thank you for your questions. And I wish you a good day for the other side of the Atlantic and a good evening for Europeans and all the very best for all the others. Thank you very much again and [Foreign Language].
Au revoir.
Ladies and gentlemen, this concludes today's conference. We appreciate your participation.