Yahoo, welcome to France!

Dailymotion

For the past half-year, Yahoo (YHOO) has been negotiating with France Telecom to buy a controlling interest in Dailymotion, an online-video website that FT acquired in 2011 for €127 million ($165 million).  According to the Wall Street Journalthe two parties reached an agreement last month in which YHOO would pay $225 million for 75% of Dailymotion, the 10th largest You Tube competitor.

This looked like a sweet deal for both sides.  FT would get all its cash back plus a profit and would retain a 25% interest in Dailymotion, while YHOO shouldered all the financial and operational burden of growing Dailymotion as fast as possible.  YHOO would take a big step forward in developing an online video arm.

redressement productif intervenes

Then Paris stepped in.  In a move reminiscent of its rejection of Pepsi’s bid to acquire yogurt-maker Danone, the parties were summoned to the offices of the French Minister of Industry (=redressement productif), Arnaud Montebourg on April 12th.  Le Monde says M. Montebourg yelled at FT, described Dailymotion as a national treasure that must remain in French hands and vetoed the deal.

Odd behavior for an official who is a central figure Paris’s campaign to convince foreigners to invest in French companies (“Say Oui to France, Say Oui to Innovation”).  On the other hand, this is France we’re talking about.

damage done

This government move has bad consequences both for France, and for Dailymotion:

–Dailymotion is now stuck being a part of a telephone utility, which doesn’t have the skills, connections or capital to help it grow.

–Dailymotion employees see that their dreams of making a large profit by cashing out in a sale, or of being key figures in a large internet entity have gone up in smoke.  The most talented are doubtless already cutting their losses and leaving France for tech jobs elsewhere.

–Paris has just shown foreigners that any capital they put into France is subject to the whims of the ruling elite and could easily be trapped there forever.   M. Montebourg’s public post-meeting gloating about his action only reinforces this idea.

–the move is another significant step down the path to economic irrelevance blazed by Japan.

France is not the only chauvinist…

…although it is the birthplace of the Nicholas Chauvin legend.

Every country restricts foreign investment to some degree.  Almost no one lets non-citizens control essential industries like defense, telecommunications or media, for example.  Developing economies, fearing that rich foreigners will spirit away local businesses on the cheap, often enact wider restrictions.  Continental European nations, where preserving the position of a small group of “haves” is a very high priority, do the same.  The US, fearing its growing economic power, won’t let China buy much of anything.

ironies

M. Montebourg seems to have no clue that he has highlighted the negative reality behind the “Say Oui to France-innovation” campaign.

The campaign’s website, which I thought was well done, features prominently an explanatory video driven by the same Dailymotion Montebourg has just eviscerated.

The French love to disparage American intellect and culture.  According to one recent description, we have been mentally ensnared by our greatest creation, Disneyland, and are now unable find our way back to the real world.  They don’t seem to get it that venerating yogurt and online videos suggests you’re a lot more confused than we are.   Or that being lost in memories of the glory of the Ancien Régime is not such a hot thing, either.