ProSiebenSat.1’s “unique business model”, combining entertainment with e-commerce and digital advertising, will see it through a tough period, while the German broadcaster is seeing “very strong interest” in its Red Arrow production unit, according to CEO Max Conze.
Speaking to analysts after the company posted a sharp drop in core advertising revenues offset by solid gains in ecommerce and Red Arrow last week, Conze said that the company’s strategy of combining the NuCom ecommerce arm with digital advertising and entertainment made sense.
Regarding Joyn, ProSiebenSat.1’s on-demand JV with Discovery, Conze said that the service had made “not a bad start” and he was confident the company could achieve its target of 10 million monthly active users in closer to one rather than two years.
Conze said that ProSiebenSat.1 was “well advanced on our subscription premium launch before the end of the year” with 10 originals lined up including Dignity, a series based on the Colonia Dignidad cult created by German exiles in 1960s Chile.
Conze said he was “reasonably confident” that the outcome of the Red Arrow review would be clear by Christmas and reiterated his view that the international part of the studio business – as opposed to digital production arm Studio71 – was “not as synergistic as we would possibly wish” to the company’s core German business.
“When one looks at content, what we’re really focused on is having a strong ecosystem that can feed content into our German entertainment network, which includes both TV channels and also digital outlets,” he said.
Analysts at Berenberg noted that ProSiebenSat.1’s Q3 “bore the twin scars of a weak linear TV advertising performance, combined with the phasing of the group’s investment programme”.
However, the analysts argued that the market was undervaluing the company and ignoring the fact that “ProSiebenSat.1 monetises its programming via multiple windows”.
“More broadly, though, and as management tirelessly reminds us, traditional linear TV advertising now represents less than half of all revenues, and, even if it is declining, the growth of the rest of the business is more than compensating, such that ProSiebenSat.1 should generate organic revenue growth of 4% or more in 2019, we think. Indeed, we think organic growth should accelerate in 2020, given the change in mix and the accelerating growth in some key segments, namely e-commerce and digital/smart advertising,” Berenberg’s analysts said.
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