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ProSiebenSat.1 streamlines business as outlook darkens
December 08, 2017
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MUNICH/FRANKFURT: Germany’s ProSiebenSat.1 Media will reorganise into divisions spanning entertainment, content production and commerce to streamline its business after dampening expectations for mid-term growth on Wednesday.

The new strategy comes after a tough year in which ProSieben has repeatedly cut its outlook for TV advertising, which still accounts for nearly half of its revenues.

Chief Executive Thomas Ebeling has already said he plans to leave the company in February after eight years in the job, leaving it unclear who will spearhead the second overhaul of the business in two years.

The reshaped company wants to achieve organic revenue growth in the mid-single percentage figures, seek strategic allies and make some bolt-on acquisitions.

“With the three-pillar strategy, we are setting ProSiebenSat.1 up competitively for the future,” Ebeling said in a statement ahead of a presentation to investors.

ProSieben will fold its lossmaking Maxdome video-on-demand service into its commercial TV operation. The move would deliver 50 million euros ($59 million)in savings through 2019-20, mainly by merging advertising sales teams, said CFO Jan Kemper.

The change, flagged in August, seeks to boost synergies between conventional “linear” TV − where ProSieben still sees growth potential of 2-3 per cent − and the digital, on-demand offerings preferred by younger viewers. “Collapsing digital entertainment into broadcast... makes complete sense,” said Sarah Simon, analyst at Berenberg Bank. “Advertisers now buy the two types of advertising as a bundle in many cases.”

ProSieben shares rose 4 per cent in a weaker overall market, making them the strongest performer in Germany’s Dax blue-chip stock index.

The company has been tripped up in the past because it gave overly specific guidance. With the new strategy it is switching to a medium-term view that sees core margins in the mid-20s in percentage terms, based on adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).

ProSieben does not yet face a major threat from digital players such as Netflix because most of its viewers prefer to watch shows that are dubbed into German rather than being aired in English with subtitles.

But it has lost traction against rival RTL Group because of its over-reliance on imported US shows. ProSieben wrote off 170 million euros against non-performing US content last quarter.

That is an area the reorganisation seeks to address by rebranding the content production and global sales division as Red Arrow Studios. The unit will also host the Studio 71 online video outfit that features personalities like wrestler-turned-actor Dwayne “The Rock” Johnson.

ProSieben said it was seeking a partner or co-investor for the content division, but gave no indication on when it might do a deal.

“A possible partner for our content production business could be either a private equity company or independent studios as well as US production businesses. We are open for discussions,” Kemper told Reuters in an interview.

“Key is that a partnership will grow the content production business and we benefit from exclusive access to content for our geographies.”

Talks were progressing on finding a minority backer for its e-commerce business, which spans dating, sex-toy and price-comparison sites, and should conclude in the second quarter of 2018.


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