Rakuten gives a ‘snip’ to the valuation of its streaming and online cinema business. This is the old WuakiTV, renamed Rakuten TV and which operates in Spain and other European markets. The Japanese giant has made a downward adjustment of 165 million euros, leaving that ‘price’ of 100% of the subsidiary at just over 35 million. This occurs in the midst of a battle for this market in which Netflix has gained more than 40% market share. The holding company has injected more than 200 million euros into the Barcelona-based company.
Specifically, as recorded in the accounts of the Luxembourg-based parent company from which it has just sold the debt convertible into Cabify shares, Rakuten has carried out the relevant valuation test of the subsidiaries it controls. One of them is Rakuten TV (Wuaki). The net book value at the beginning of last year was just over 266 million euros, after the numerous capital injections that it has been carrying out since joining the group in 2012. In that same year it once again shored up the balance with another 11 million ‘extra’. But the surprise came after that exam.
Specifically, the 200 million euros valuation – including that new injection and after the 77 million cuts accumulated in recent years – have been reduced to just 35 million after a very relevant financial ‘impairment’. That is, it has reduced its net book value by more than 80%. If the evolution of all the assets that live under this Luxembourg umbrella is analyzed, the adjustment carried out in the television division has been the most relevant. The company only limits itself to ensuring in the management report, consulted by La Información, that this measure occurs within the framework of those tests developed to “evaluate whether there is deterioration in investments.”
Wuaki TV was founded in 2007 by Jacinto Roca and Josep Mitjá. Five years later it was acquired by Rakuten. The price of the transaction was not made public, but it is estimated that it was around 15 million euros. The goal that the Japanese set themselves is to become a relevant player in streaming and video on demand through the rental and purchase of titles. Year after year the parent company in Luxembourg has had to inject capital to compensate for losses in a model with high costs with retransmission rights as one of the highlighted chapters.
During this time, strong competition has emerged in this on-demand television segment. Since the acquisition of Rakuten, other international options such as Netflix, HBO or Amazon Prime Video have emerged in Spain and other venues more specialized in independent productions such as Filmin have grown. The first has gained a lot of market share. According to the National Commission of Markets and Competition (CNMC) in a report, published by La Información, it concentrated 45% of the 1.2 billion euros that this activity generated in Spain in the ‘post-pandemic’ year. According to their own accounts, in 2022 Americans increased their turnover by 22% to 683 million.
Rakuten TV’s business model has traditionally been more focused on the transaction – purchase or rental – than on subscription. Since mid-2019, it has promoted free content in exchange for advertising from linear channels to on-demand productions – with some documentaries and original series under its brand. From the Spanish subsidiary they invoice not only the Spanish business, but also that of other European locations where they are present. There is no updated data for the 2022 financial year, since the latest accounts presented are those of 2021, when revenues fell to 47.5 million euros (with stabilization of the continental market and a 39% drop in the Spanish market until leaving Las Ventas. at 10.8 million) and losses grew to 10.4 million.
Changes in the dome
Between 2021 and 2022 there were significant changes at the top. Since mid-2019, Josep Mitjá was no longer in the company’s discipline. In 2021, after the summer, the departure of the then CEO and co-founder, Jacinto Roca, was completed. He did it after an internal audit carried out by the Asian group, as El Confidencial revealed. He was replaced by a director of the house, Cédric Dufour, an executive of French origin who had been in charge of leading the e-commerce business in Europe. A few months after this replacement, the financial manager, Leandro Rosado, left.
The audiovisual platform is the main business of Rakuten, which formally closed its online store in the country more than five years ago. But recently a reopening of its store took place but it does so with a membership model. That is, you receive a commission for bringing buyer traffic to digital establishments ranging from supermarkets like Lidl, to clothing brands like Shein, or travel agencies. They share that money with the buyer, who is promised a percentage return (cashback).