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Broadcast consolidation: Mediaset’s moves

Pan-European consolidation amongst broadcasters once again became a talking point over the last couple of weeks thanks to a couple of big moves by Italy’s Mediaset.

First came the Italian company’s acquisition of a 9.6% stake in Germany’s ProSiebenSat.1in what CEO Pier Silvio Berlusconi characterised as a strategic move.

“The rapid process of globalisation that is determining the international scenario is such that European media companies like us need to join forces if we are to continue to compete, or even just resist, in terms of our European cultural identity, eventual attacks by the global giants,” said Berlusconi.

Mediaset followed up its investment in Germany with a move this week to consolidate its Spanish namesake, in which it holds a 52% stake, under a new Netherlands-based holding company, MediaforEurope (MFE).

The Spanish move was welcomed by analysts as a “bold move” that will create a stronger business. Investment bank Berenberg said that the new structure would deliver synergies in the area of distribution and advertising technology. However, it noted that these synergies are less likely to extend to content, where local remains king.

The last point is a highly significant factor for broadcasters considering whether or not pan-European mergers make sense. The attraction of consolidation generally is to achieve scale and enable the realisation of synergies. In the case of broadcasters, content is the major cost item, and opportunities for synergies from common content commissioning and acquisition are limited across markets with different languages and cultural expectations.

While there is a growing international market for certain types of high-end drama, the overall opportunity for mass-market broadcasters to realise cost savings from international mergers is limited. For commercial broadcasters, that leaves synergies from technology and the advertising business.

There are clearly opportunities here. In technology, the move away from over-the-air broadcasting to streaming means that there are clear economies of scale in building cloud-based distribution platforms that can serve multiple markets.

In advertising, European broadcasters are already teaming up to realise the benefits of cooperation. The European Media Alliance of major European broadcasters, in which ProSiebenSat.1 is a key player, was created as a way to facilitate cooperation across national boundaries where that made sense, with advertising a central focus. The European Broadcaster Exchange initiative of ProSiebenSat.1, Mediaset, TF1 and Channel 4 to set up common access to inventory for premium international brands to run pan-European campaigns is one example of this.

Cooperation on advertising at a technical level is also a fruitful area. ProSiebenSat.1 last week also teamed up with German commercial broadcaster rival RTL Deutschlandto establish a 50:50 joint venture to deliver a platform for programmable buying of addressable TV and online video ads.

This week I chaired a panel session at the Variety TV Summit Europein London that addressed evolving partnerships between broadcasters both in streaming and in advertising. The session featured executives from ProSiebenSat.1, BritBox – the US JV between BBC Studios and ITV whose name has now been adopted for a planned British SVOD service –and Spain’s Atresmedia, which has partnered with Mediaset España and RTVE to create LOVEStv, a joint platform for advanced TV and, in the future, a joint OTT initiative.

The panellists assessed, among other things, what does and does not make sense, with Nicolas Eglau, EVP of international at ProSiebenSat.1 observing that cooperation, rather than a full merger, is probably sufficient to realise the synergies that exist in areas such as advertising.

For these reasons, the prospects of wider consolidation in European broadcasting are probably not strong, at least for the near future. Speaking to German newspaperDie Weltabout the Mediaset investment, ProSiebenSat.1 CEO Max Conze this week said that Mediaset was welcome as an investor but added that a broader merger made little senseas it would be a diversion from the goal of reorientation to a future likely to be dominated by streaming. He said that the European Media Alliance offered a way to “build business models together”.

Whether cooperation or consolidation is the best way to deliver synergies in advertising and streaming is still a matter for debate. Berenberg’s analysis of the rationale for MFE endorsed the view that a combination of this type has greater potential to deliver benefits that looser forms of collaboration.

However, consolidating an entity in which the consolidator already has a majority stake and a long history of involvement has fewer potential pitfalls than a full-on merger of independent large-scale broadcasters. A bigger pan-European consolidation may still be some way off.