Clients login

The addition of SBS boosted Prosieben's EBITA by 36.2 per cent. Both groups' net profit was dented by fines imposed by the German Cartel Office after it found the advertising rebate system employed by the pair violated competition law. RTL was fined Euro96m, while Prosieben was forced to pay þ120m. With other costs, RTL ended the year with a net profit of Euro674m (down from Euro1.1bn in 2006); Prosieben's net profit fell by more than 50 per cent to Euro89m (2006: Euro241m).

ProSiebenSat.1 expects to make Euro40m in cost savings during 2008 when synergies between SBS and its German channels start to take effect. Benefits should rise to Euro80m-90m by 2012. The new group announced plans to further expand its presence in Europe, launching additional free-TV channels in 2008. While ProSiebenSat1 remains indecisive about keeping its production arm, RTL Group plans to double operating profit of production company Fremantle Media by 2012 from the current Euro131m. Both groups also said they want to invest more in on-line activities in 2008.

Our take...
With the acquisition of SBS, ProsiebenSat1 has extended its traditional rivalry with RTL from Germany to additional European markets. Both groups have witnessed their advertising market shares in German TV decrease since 2003. RTL's has fallen from 45.2 per cent to 43.3 per cent, while Prosieben's has dropped from 44.6 per cent to 43.1 per cent.

Screen Digest forecasts that TV advertising conditions in Germany will be challenging throughout 2008 (1.6 per cent growth). But the rival broadcasters are now directly competing in higher-growth advertising markets, notably the Netherlands and Eastern Europe. In the Netherlands, the SBS channels increased their share of the TV advertising market by 8.4 percentage points to 30.7 per cent in 2007, while the local RTL Group channels grew 6.5 percentage points to 40.4 per cent. In Eastern Europe, where the broadcasting balance of power is less established, ProSiebenSat.1 is now building on SBS's presence in Hungary and Romania. Romania alone returned 50 per cent TV advertising growth in 2007. Nevertheless, RTL is highly likely to maintain its lead on a Pan-European basis in the next years. Even considering full year SBS and Prosieben revenues, RTL is still double the size of Prosieben.

Despite ProsiebenSat1's launches of three new free-TV channels in Scandinavia in 2007 and further expansion plans in 2008, RTL has the advantage of being present in two of the biggest European TV markets: With Five in the UK and M6 in France, RTL capitalizes on the combination of strong brands and fast multichannel growth. Net advertising market share for Five went up to a record-high of 9.3 per cent in 2007, helped by its digital channels. Similarly, M6's W9 was the fastest growing DTT channel in France. However, as both groups want to become less dependent on the highly volatile TV advertising markets, they are increasingly diversifying their revenue. Prosieben's Income from sources such as on-line services and on-demand content grew by 67 per cent in 2007 boosting revenue by Euro399m.