EM.TV's kid unit up for adoption

CEO sees 18.7% sports growth as core of firm's future

MUNICH -- Munich-based sports and children's TV specialist EM.TV is selling off its kids division.

"If we look at the market for sports, we can see that it's taking up much more of people's free time, either actively or passively," CEO Werner Klatten said Tuesday.

But children's television is stagnating in terms of growth, he said, partly for demographic reasons, partly because it's being shunted off onto specialty channels, which don't make enough money to invest in new programming.

"The (children's TV) market is oversaturated with older programming," Klatten said.

EM.TV will begin the sales process in the next few weeks, he said. Once the sale has been completed, the company will change its name to EM Media AG.

The division on the block, which the company calls "Entertainment," consists of its fully owned units EM Entertainment GmbH and Junior.TV. Those companies either fully own or have major stakes in such smaller companies as Australia's Flying Bark Prods., the EMTV & Waverly agency in the Netherlands and Planeta Junior, a distribution platform in Spain. EM Entertainment also has a stake in U.S. VOD platform Kabillion.

In addition, the unit has what it said is one of the largest children's rights libraries in the world, with such classic titles as "Heidi" and "Pippi Longstocking," as well as popular new productions like "Zigby."

To illustrate the difference in profitability between the entertainment and sport divisions, Klatten referred to the company's first-quarter results, also released Tuesday. Sports revenue hit €54.7 million ($73.6 million), an 18.7% year-over-year increase, with a profit of €7.3 million ($9.8 million), compared with a year-ago loss of €2.6 million.

Meanwhile, entertainment division revenue sank from €13.9 million to €5.6 million ($7.5 million), leading to a quarterly loss of €200,000 ($269,000), compared with last year's €8.1 million profit.

The company's total revenue for the quarter remained essentially stable at €60.3 million ($81.1 million) -- last year's stood at €60.1 million. Profit was up from a year-ago loss of €500,000 to €3.1 million ($4.2 million).

"The numbers explain why we've decided to bet on the faster horse," Klatten said. The company's sports unit includes DSF, Germany's leading 24-hour sports channel, with a 1.9% market share in the 14-49 demo, and Sport1, recently voted Germany's best sports Web site and consistently among the top 15 German Web sites.

After 18 months of deliberating whether to make the investment necessary to turn the entertainment division into a more profitable one or to sell it, management and the supervisory board decided on the latter, Klatten said.
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