Digital, Drama Fuel Double-Digit Growth at Germany's ProSieben

ProSiebenSat.1 CEO Thomas Ebeling

The media group recently set up joint venture Mad Rabbit with Canadian director/showrunner Kari Skogland to produce high-end drama series.

Aggressive expansion into television production and the digital sphere is paying off for German TV group ProSiebenSat.1, which Tuesday announced double-digit growth in revenue and operating profit for the first quarter of 2016.

Revenue shot up 22 percent to $927 million (€802 million), while recurring operating profit jumped 12 percent to $196 million (€170 million). Underlying net income grew 8 percent to $88 million (€76 million).

The group, which operates a group of free and pay-TV channels in German-speaking Europe, has leveraged the continuing strength of the German advertising market to push into production and online businesses. It has bought up several production companies, including L.A.-based Kinetic Content and Fabrik Entertainment, New York's Left/Right, Britain's CPL and Cove Pictures and Snowman Productions in Scandinavia. Early this month, ProSiebenSat.1 set up a joint venture, Mad Rabbit, with Canadian director and showrunner Kari Skogland, whose work includes directing gigs on The Americans and The Walking Dead, to develop high-end drama for the international marketplace.

Separately, ProSieben has been quietly building its digital portfolio, in part through share swap deals with start-ups whereby the company exchanges advertising on its TV platforms for equity stakes in online companies. The group now has majority stakes in online portals such as travel site etraveli, online jeweler Valmano, and Verivox, a consumer site for shopping for energy providers in Germany.

This diversification meant that in the first quarter, 43 percent of ProSieben's revenue came from outside the television advertising business, compared with around 30 percent in the year-ago period. By 2018, the company predicts that fully half of its revenue will be from production and digital operations.

“Thanks to considerably higher TV advertising revenues and the dynamically growing digital business, we are successfully pursuing our growth trajectory,” said ProSiebenSat.1 CEO Thomas Ebeling. “We are also making good progress in achieving our mid-term targets. By 2018, we want to increase revenues to €4.2 billion ($4.9 billion), which is a plus of €1.85 billion ($2.1 billion) compared to 2012. We already realized almost 60 percent of this target.”

Starting from the third quarter of this year, ProSiebenSat.1 will split its digital business into two separate segments: digital entertainment and ventures & commerce divisions, an acknowledgement that, increasingly, ProSieben is as much a digital retailer as it is a TV company.

The old-school TV business, however, is still going strong. For the quarter, ProSiebenSat.1 saw TV revenue increase 5 percent to $570 million (€493 million) and operating profit climb 4 percent to $151 million (€131 million). The company expects the TV ad market to post net growth of 2 to 3 percent this year.

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