European broadcasters already feeling sting
Financial unease has reduced budgets and work forcesLONDON -- Regardless of whether the U.S. passes the $700 billion bailout the second time around, the impact of chronically tightening financial markets and nearly 12 months of economic jitters are already blowing cold winds over Europe's biggest broadcasters.
"I'm operating on the assumption that the world as we know it isn't going to end and that the bailout program will be passed," said one European media analyst based in London.
"But the impact will be widely felt and comes on top of a tough year. Commercial broadcasters and especially those who are mostly reliant on advertising are in for a very rough ride," he added.
Even before the impact of the multiple bank failures of the past month cycles through the economy, free-to-air channels are showing the strain of nearly a year of financial unease -- slashing program budgets, issuing profit warnings and issuing a confetti of pink slips.
This week, Britain's ITV announced that, by the end of February, it will have cut 1,000 jobs, almost a fifth of its work force.
COO John Cresswell said the cuts are the latest cycle of "efficiency" savings intended to protect ITV's annual £1 billion ($1.76 billion) a year program spend.
Last week, Germany's ProSieben issued a profits warning, with the private equity-backed venture now reckoned to be worth just 20% of what KKR and Permira paid for it three years ago.
KKR and Permira are reportedly looking to cut €100 million ($138 million) from its budget this year, and ProSieben is still without a replacement for CEO Guillaume de Posch, who steps down at the end of the year. "No one seems willing to take on what looks like a suicide mission," a German insider said.
RTL Group, Europe's largest commercial has been cautiously optimistic about the German market, saying it sees no signs of advertising downturn. In fact, RTL boasted double-digit revenue and operating profit growth in Germany in the first half. But that hasn't helped the company's share price, which is down 46% for the year.
In France, private network TF1 recently invested €133 million ($184 million) to completely restructure its content and production activity amid rumors of who will buy out the group, but its shares are trading at half their worth a year ago.
Not everyone is depressed, though. In fact, the very slough of despond that the industry is lurching through has some potential buyers excited.
"There are going to be very good buying opportunities in the next six months," said one London-based private equity executive with investments in broadcast companies across the continent. "Buyers will borrow less and will pay less, but the deals are very good if properly picked."
Mimi Turner reported from London; Scott Roxborough reported from Cologne, Germany.