TF1 in talks with UGC to join forces

Media groups seek to reduce costs and risk

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CANNES -- France's leading commercial broadcaster, TF1, is in discussions with production and distribution powerhouse UGC to eventually pool their film co-production and acquisition forces, the groups said Thursday.

The two Gallic media groups, which cited the need to reduce costs and risk in the current global economic crisis, also plan to partner for theatrical distribution in France and international audiovisual rights.

TF1 and UGC hope that the merger will make both entities competitive on the French and international markets in the wake of cutbacks in TV investments in the territory. The groups expect negotiations to last for a few months, and hope to finalize plans by the end for the year.

"The film industry is facing a very important financial crisis. TV networks that finance films are seeing a drop in ad revenue so this will have a huge impact on us. We anticipate this, so we're trying to build a strong support system to resist it," GC Images' general director Brigitte Maccioni said. "We want to remain a major player in the industry."

Both groups will continue to operate autonomously and keep their respective catalogs separate. TF1 production will operate independently and UGC is planning to make 6-8 films per year under its own banner. The merger could see TF1's distribution arm, TFM Distribution, become obsolete as UGC would release the group's film under the UGC imprimatur.

"We share the same vision. We're like a couple -- we're engaged and the idea is to eventually get married," Maccioni said. UGC will continue to distribute 15-20 films per year under the joint distribution venture in Gaul. As for acquisitions, "the idea is that that company that buys the film takes the majority risk and the other will be a partner," Maccioni said.

TF1, France's leading commercial TV broadcaster, has been struggling this year, recently announcing a 13% drop in first-quarter revenue. To combat the drop in ad sales and ratings, TF1 is trying to penny pinch across the board, with tentative plans to sell some of its broadcasting rights to the 2010 FIFA World Cup in addition to the cost-cutting merger with Gallic production and distribution powerhouse UGC.